What is the journal entry for the following? The bank statement as of December 31, 2018...

What is the journal entry for the following?

The bank statement as of December 31, 2018

5) The liability insurance policies were paid for two years coverage on July 1, 2018.

	Unadjusted		Adjusting		Income		Balance
	Trial	Balance	Entries		Statement		Sheet
ACCOUNT	DR	CR	DR	CR	DR	CR	DR	CR
Insurance Expense	136000

Expert Solution

Insurance expense shows a debit balance of $ 136,000, for 24 months.
However, the policy was purchased on Jul 1 2018 and till 31 Dec 2018, ONLY 6 months have expired.
This means that Insurance expense account should show a DEBIT balance equal to 136000 x 6/24 = $ 34,000
Debit balance required = $ 34,000
Unadjusted Debit balance existing = $ 136,000
Adjusting journal Entry

Date	General Journal	Debit	Credit
31-Dec-18	Prepaid Insurance	$102,000
	Insurance Expense [136000 - 34000]		$102,000

	Unadjusted		Adjusting		Income		Balance
	Trial	Balance	Entries		Statement		Sheet
ACCOUNT	DR	CR	DR	CR	DR	CR	DR	CR
Insurance Expense	$136,000			$102,000	$34,000
Prepaid Insurance			$102,000				$102,000

ekkarill92 answered 1 year ago

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