Question

Adjustment for Prepaid Expense The prepaid insurance account had a beginning balance of $5,860 and was debited for $3,050 of premiums paid during the year. Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future periods is $2,320. If an amount box does not require an entry, leave it blank.

Answer 1

Adjustment Entry related to Prepaid Expenses Credit ($) Debit ($) 6.590 Particulars Insurance Expenses A/C Dr. To Prepaid Insurance A/c (To record the isurance expenses incurred at the end of year) 6,590 Working Note: Calculation of Insurance Expenses at the end of year Insurance Expenses = Opening Balance of Prepaid Insurance + Insurance Premiums paid during the year - Unexpired Insurance related to future periods Insurance Expenses =$5860 + $3050 - $2320 Insurance Expenses =$6590