Question

The prepaid insurance account had a balance of $9,400 at the beginning of the year. The account was debited for $10,400 for premiums on policies purchased during the year.
Journalize the adjusting entry required at the end of the year for each of the following situations:
a. The amount of unexpired insurance applicable to future periods is $3,730.
b. The amount of insurance expired during the year is $18,100.

Answer 1

Answer:

Following are the response to the given points:

Explanation:

$\text{Insurance Expense} =\text{ Beginning Prepaid Insurance} + \text{Cash Premium Paid} -\text{Ending Prepaid Insurance}$

                             $= \ 9,400 + \ 10,400 - \ 3,730\\\\ = \ 16,070$

$Date \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ General \ Journal \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ Dr. \ \ \ \ \ \ \ \ \ Cr.$ $March \ 31\ \ \ \ \ \ \ \ Insurance \ Expense \ \ \ \ \ 16,070$

                       $Prepaid\ Insurance \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 16,070$

For point b:

$Date \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ General \ Journal \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ Dr. \ \ \ \ \ \ \ \ \ Cr.$ $March \ 31\ \ \ \ \ \ \ \ Insurance \ Expense \ \ \ \ \ 18,100$

                       $Prepaid\ Insurance \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 18,100$