Question

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For each separate case below, follow the three-step process for adjusting the prepaid asset account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2 Assume no other adjusting entries are made during the year. Prepaid Insurance. The Prepaid Insurance account has a $5.300 debit balance to start the year. A review of insurance policies shows that $1,200 of unexpired insurance remains at year-end Prepaid Insurance Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal Step 3: Record the December 31, adjusting entry to get from step 1 to step 2 b. Prepaid Insurance. The Prepaid Insurance account has a $6,490 debit balance at the start of the year. A review of insurance policies shows $1,280 of insurance has expired by year-end. Prepaid Insurance Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal < Prev 5 of 40 Next >

Answer 1

--Requirement [a]

				Prepaid Insurance
Step 1	$5,300	Debit		$5,300
Step 2	$1,200	Debit		$4,100
Step 3	Accounts title	Debit	Credit	$1,200
	Insurance Expense	$4,100
	Prepaid Insurance [$ 5300 - 1200]		$4,100

--Requirement [b]

				Unearned Revenue
Step 1	$6,490	Debit		$6,490
Step 2	$5,210	Debit		$1,280
Step 3	Accounts title	Debit	Credit	$5,210
	Insurance Expense	$1,280
	Prepaid Insurance		$1,280