On March 15, Smart Inc. paid $1,200 for a one-year insurance policy that starts on April...
On March 15, Smart Inc. paid $1,200 for a one-year insurance policy that starts on April 1.
a) What should be recorded to the accounting equation on March 15?
| Assets | Liabilities | Equity |
b) What adjustment should be recorded to the accounting equation to properly state the accounts at April 30?
| Assets | Liabilities | Equity |
Homework Answers
(a)
| Assets | Liabilities | Equity | |
| Cash | + Prepaid insurance | ||
| -1,200 | +1,200 | ||
(b)
| Assets | Liabilities | Equity | |
| Prepaid insurance | |||
| -100 | -100 | ||
Insurance expense for 1 year = $1,200
Insurance expense for 1 month = 1,200 x 1/12
= $100
Kindly comment if you need further assistance. Thanks‼!
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