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7 May, 00:58

The prepaid insurance account had a balance of $3,000 at the beginning of the year. The account was debited for $32,500 for premiums on policies purchased during the year. Journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment: (A) the amount of unexpired insurance applicable to future periods is $4,800; (B) the amount of insurance expired during the year is $30,700

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  1. 7 May, 01:05
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    1. Insurance expense A/c Dr $30,700

    To Prepaid insurance A/c $30,700

    (Being the insurance expense is adjusted)

    2. Insurance expense A/c Dr $30,700

    To Prepaid insurance A/c $30,700

    (Being the insurance expense is expired)

    Explanation:

    The journal entries are shown below:

    1. Insurance expense A/c Dr $30,700

    To Prepaid insurance A/c $30,700

    (Being the insurance expense is adjusted)

    The computation is shown below:

    = Balance in prepaid insurance account + premiums on policies purchased - unexpired insurance applicable

    = $3,000 + $32,500 - $4,800

    = $30,700

    2. Insurance expense A/c Dr $30,700

    To Prepaid insurance A/c $30,700

    (Being the insurance expense is expired)
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