Question

The prepaid insurance account had a balance of $9,400 at the beginning of the year. The account was debited for $10,400 for premiums on policies purchased during the year.

Journalize the adjusting entry required at the end of the year for each of the following situations:
a. The amount of unexpired insurance applicable to future periods is $3,730.
b. The amount of insurance expired during the year is $18,100.

Answer 1

Following are the response to the given points:

Step-by-step explanation:

`\text{Insurance Expense} =\text{ Beginning Prepaid Insurance} + \text{Cash Premium Paid} -\text{Ending Prepaid Insurance}`

`= \$9,400 + \$10,400 - \$3,730\\\\ = \$16,070`

`Date \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ General \ Journal \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ Dr. \ \ \ \ \ \ \ \ \ Cr. \\\\`
`March \ 31\ \ \ \ \ \ \ \ Insurance \ Expense \ \ \ \ \ 16,070 \ \ \ \ \ \ \ \ \ \ \ \ \ \\\\`

`Prepaid\ Insurance \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 16,070\\\\`

For point b:

`Date \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ General \ Journal \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ Dr. \ \ \ \ \ \ \ \ \ Cr. \\\\`
`March \ 31\ \ \ \ \ \ \ \ Insurance \ Expense \ \ \ \ \ 18,100 \ \ \ \ \ \ \ \ \ \ \ \ \ \\\\`

`Prepaid\ Insurance \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 18,100\\\\`