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30 September, 19:34

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.

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  1. 30 September, 22:38
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    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
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