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24 January, 23:37

On April 1, Tenity, Inc. paid $3,300 for an insurance premium on a three-year insurance policy. At the end of December, Tenity's fiscal year-end, what should be the balance in the prepaid insurance account?

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  1. 25 January, 00:02
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    Balance of prepaid insurance: $2,475

    Explanation:

    On April 1, Teneit, Inc shall record the following journal entry in its accounts in respect of insurance premium paid for three years.

    Debit Credit

    Prepaid Insurance $3,300

    Cash $3,300

    At December 31, the following adjusting journal entry shall be recorded in the accounts of Tenity, Inc. in respect of insurance premium expense

    Debit Credit

    Insurance expense $825

    (3,300*9/36)

    Prepaid Insurance $825

    So based on above two journal entries, the following shall be the balance of the prepaid insurance as at December 31:

    Balance of prepaid insurance: $2,475

    (3,300-825)
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Home » Business » On April 1, Tenity, Inc. paid $3,300 for an insurance premium on a three-year insurance policy. At the end of December, Tenity's fiscal year-end, what should be the balance in the prepaid insurance account?
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