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19 May, 10:51

The balance in the prepaid insurance account before adjustment at the end of the year is $27,000. Journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment;

(A) the amount of insurance expired during the year is $20,250;

(B) the amount of unexpired insurance applicable to futre periods is $6,750.

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  1. 19 May, 10:54
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    (A) Debit Insurance expense $20,250

    Credit Prepaid insurance $20,250

    Being entries to recognize insurance amortization expense for the year.

    (B) Debit Insurance expense $20,250

    Credit Prepaid insurance $20,250

    Being entries to recognize insurance amortization expense for the year.

    Explanation:

    Prepaid insurance account before adjustment = $27,000

    (A) the amount of insurance expired during the year is $20,250

    To account for the expired amount,

    Debit Insurance expense $20,250

    Credit Prepaid insurance $20,250

    Being entries to recognize insurance amortization expense for the year.

    (B) the amount of unexpired insurance applicable to future periods is $6,750

    Amount expired = $27,000 - $6,750

    = $20,250

    To account for the expired amount such that the amount of unexpired insurance applicable to future periods is $6,750,

    Debit Insurance expense $20,250

    Credit Prepaid insurance $20,250

    Being entries to recognize insurance amortization expense for the year.
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