Question

On December 31, 2022, before any year-end adjustments, Canterbury Shoe Repair's Prepaid Insurance account had a balance of $3,500. It was determined that $2,200 of the Prepaid Insurance had expired. The adjusted balance for Prepaid Insurance at December 31, 20122, will be________________.

Answer 1

To calculate the adjusted balance for Prepaid Insurance, we subtract the expired portion of $2,200 from the initial balance of $3,500, resulting in an adjusted balance of $1,300 at December 31, 2022.

Step-by-step explanation:

The subject of the question is determining the adjusted balance for the Prepaid Insurance account at the end of the accounting period after recognizing the expired portion of the insurance coverage. The beginning balance in the Prepaid Insurance account was $3,500. Since it was determined that $2,200 of the Prepaid Insurance had expired, we need to subtract this amount from the initial balance to find the adjusted balance. The calculation is as follows:

Adjusted Prepaid Insurance balance = Beginning Prepaid Insurance balance - Expired Prepaid Insurance

Adjusted Prepaid Insurance balance = $3,500 - $2,200

Adjusted Prepaid Insurance balance = $1,300

So, the adjusted balance for Prepaid Insurance at December 31, 2022, will be $1,300.

Answer 2

$2,200

Step-by-step explanation:

The computation of the adjusted balance of prepaid insurance is shown below:

= Expired amount of prepaid insurance

= $2,200

Insurance expense A/c Dr $2,200

To Prepaid insurance Cr $2,200

(Being the insurance expense is recorded)

At the time of insurance expired, the amount is transferred from current asset to the insurance expense account in the income statement