Question

QS 3-5 Prepaid (deferred) expenses adjustments LO P1 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

Answer 1

a) Step :1 6,000 1,550 DR or CR Debit Debit Prepaid Insurance 6,000 1,550 Step 2 Step :3 Credit Adjusting entry :: Insurance expense Debit 4,450 To Prepaid Insurance 4,450 Prepaid Insurance 7,190 b) Step :1 Step :2 DR or CR Debit Debit 7,190 1,560 1,560 Step :3 Debit Credit Adjusting entry :- Insurance expense To Prepaid Insurance 5,630 5,630 c) Step :1 Step :2 39,600 33,000 DR or CR Debit Debit Prepaid Rent 39,600 33,000 Step :3 Debit Credit Adjusting entry :- Rent expense To Prepaid Rent 6,600 6,600