Question

The prepaid insurance account had a balance of $7.000 at the beginning of the year. The account was debited for $24,000 for premiums on policies purchased during the year ending on March 31 Journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment: (a) the amount of unexpired insurance applicable to future periods is $8,500, (b) the amount of insurance expired during the year is $22.500 Refer to the Chart of Accounts for exact wording of accounties

Answer 1

Journal

a	Insurance expense	22,500
	Prepaid insurance		22,500
b	Insurance expense	22,500
	Prepaid insurance		22,500

a)

Prepaid insurance, beginning = $7,000

Insurance paid during the year = $24,000

Prepaid insurance, ending = $8,500

Insurance expense = Prepaid insurance, beginning + Insurance paid during the year - Prepaid insurance, ending

= 7,000 + 24,000 - 8,500

= $22,500

b)

Insurance expired = $22,500

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