The balance in the prepaid insurance account before adjustment at the end of the year is $27,000. Journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment; (A) the amount of insurance expired during the year is $20,250; (B) the amount of unexpired insurance applicable to futre periods is $6,750.
Answered Essay: The balance in the prepaid insurance account before adjustment at the end of the year is $27,000.
Expert Answer
| Adjusting Journal entry: | |||||||
| Alternatives | Genral Journal | Debit | Credit | ||||
| (A) | Insurance expenses | $ 20,250.00 | |||||
| Prepaid Insurance | $ 20,250.00 | ||||||
| (To record insurance expenses for the year) | |||||||
| (B) | Insurance expenses | $ 20,250.00 | |||||
| Prepaid Insurance | $ 20,250.00 | ||||||
| (To record insurance expenses for the year) | |||||||
| Working: | |||||||
| Prepaid Insurance before Adjsutment | $ 27,000.00 | ||||||
| Insurance expired during the year | $ -20,250.00 | ||||||
| Unexpired insurance applicable to futre periods | $ 6,750.00 | ||||||
| Note : | Meaning of both alternatives are same for adjusting journal entries | ||||||
