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1 September, 00:48

Prepaid Insurance shows a balance of zero at September 30, but Insurance Expense shows a debit balance of $2,700, representing the cost of a three-year fire insurance policy that was purchased on September 1 of the current year. On August 31 of this year, Cash was debited and Service Revenue was credited for $1,800.? A. The $1,800 related to fees for a three-month period beginning September 1 of the current B. The company's income tax rate is 39%. After making the above adjustments, SPC's net income before tax is $10,000. C. No income tax has been paid or recorded.

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  1. 1 September, 03:01
    0
    The journal entries are shown below:

    1. Prepaid insurance A/c Dr $2,625

    To Insurance expense $2,625

    (Being the insurance is transferred to prepaid insurance)

    The computation is shown below:

    = $2,700 - $2,700 * 1 months : 36 months

    = $2,700 - $75

    = $2,625

    2. Service revenue A/c Dr $1,200

    To Unearned Service revenue $1,200

    (Being the unearned service revenue is recorded)

    The computation is

    = $1,800 * 2 months : 3 months

    = $1,200

    3. Income Tax Expense A/c $3,900

    To Income Tax Payable A/c $3,900

    (Being the income tax expense is recorded)

    The computation is

    = $10,000 * 39%

    = $3,900
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