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Illusion [34]
3 years ago
9

Mountaineer Excavation operates in a low-lying area that is subject to heavy rains and flooding. Because of this, Mountaineer pu

rchases one year of flood insurance in advance on March 1, paying $24,600 ($2,050/month).
1. Record the purchase of insurance in advance on March 1.

2. Record the adjusting entry on December31.
Business
1 answer:
vitfil [10]3 years ago
4 0

Answer:

The Journal entries are as follows:

(i) On March 1,

Prepaid insurance A/c Dr. $24,600

        To cash A/c                              $24,600

(To record the purchase of insurance in advance)

(ii) On December 31,

Insurance expense A/c Dr. $20,500

             To Prepaid insurance           $20,500

(To record the insurance expense)

Workings:

Insurance expense:

= $2,050 × 10 months (From March 1 to December 31)

= $20,500

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