Adjusting Entries for Prepaid Insurance The prepaid insurance account had a bala

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Adjusting Entries for Prepaid Insurance

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. 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.

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Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Beginning balance in prepaid insurance                     7,000.00 Addition during the year                  24,000.00 Ending balance in prepaid insurance before adj                  31,000.00 Dr Amt Cr Amt a) Insurance expense DR                  22,500.00 To prepaid insurance              22,500.00 (Being insurance expired = 31000 - 8500) b) Insurance expense DR                  22,500.00 To prepaid insurance              22,500.00 (Being insurance expired)

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