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.

Question

Corbin Haley

Business

12 May, 07:58

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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Answers (1)

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Immanuel Gibbs · Answer 1

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