Answer to Question #47160 in Finance for Felisia Fitri Anita

Question

The prepaid insurance account had a balance of $5,400 at the beginning of the
year. The account was debited for $6,000 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 $1,000; (b) the amount of insurance expired during the year is
$10,400.

Answer 1

$5,400 at the beginning, account was debited for $6,000 for premiums on policies purchased.
(a) If the amount of unexpired insurance applicable to future periods is $1,000, then the ending balance will be: 5,400 + 6,000 - 1,000 = $10,400.
(b) If the amount of insurance expired during the year is $10,400, then the ending balance will be: 5,400 + 6,000 - 10,400 = $1,000.