Question

At December 31, the unadjusted trial balance of H&R Tacks reports Prepaid Insurance of $9,360 and Insurance Expense of $0. The insurance was purchased on July 1 and provides coverage for 24 months. Required: Prepare the adjusting journal entry on December 31. Prepare the T-accounts for each account, enter the unadjusted balances, post the adjusting journal entry, and report the adjusted balance.

Answer 1

Answer:

Explanation:

Total insurance premium paid                                    =              9360

Total Months                                                                =               24

Monthly Expense   9360/24                                       =               390

Expense to be recorded in books

for the current year ended  of 6 months  390*6       =               2340

Prepaid insurance at closing date  =  9360-2340    =               7020

                   

Adjusting journal  Entry

insurance Expense     2340

       Prepaid Insurance    2340

To record the expense not recorded in books

T-Accounts

                                 Prepaid Insurance

opening =              0

Cash                   9360

                                                           Expense               2340

                                                            Closing bal.         7020

                                   Insurance Expense

opening =                 0

prepaid insurance  2340

                                                           profit/loss               2340

                                                            Closing bal.               0

                                  Un-adjusted trail Balance    

                                                               Debit                    Credit

Prepaid insurance                                9360

                                        adjusted trail Balance

                                                               Debit                    Credit

Prepaid insurance                                  7020

Insurance Expense                                 2340