On December 31, an adjusting entry will debit Insurance Expense for $400 (the amount that expired: 1/6 of $2,400) and will credit Prepaid Insurance for $400. This means that the debit balance in Prepaid Insurance at December 31 will be $2,000 (5/6 of the $2,400 cost), since ...
You also report unexpired insurance in your financial statement. Amounts are based on the unexpired insurance journal entry for the end of the reporting period when you make up your statements. On the income statement, you report the amount of insurance that expired during the period as an expe...
The adjusting journal entry is done each month, and at the end of the year, when the lease agreement has no future economic benefits, the prepaid rent balance would be 0. Example #2 Upon signing the one-year lease agreement for the warehouse, the company also purchases insurance for the w...
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Deduct the monthly cost from the total prepaid amount. In this scenario, the result is $1,100 ($1,200 prepaid insurance minus $100 monthly cost). Record the result as a current asset on your business balance sheet. This is called an adjusting entry. ...
On December 31, an adjusting entry will show adebitinsurance expense for $400—the amount that expired or one-sixth of $2,400—and willcreditprepaid insurance for $400. This means that the debit balance in prepaid insurance on December 31 will be $2,000. This translates to five months of...
What is the accounting entry for amortization of prepaid insurance? During the accounting close, adjusting accounting entries reduce the prepaid expense via a credit on the balance sheet and increase the appropriate general ledger expense account with an equal debit on the income statement. The adjust...
Each month, an adjusting entry will be made to expense $10,000 (1/12 of the prepaid amount) to the income statement through a credit to prepaid insurance and a debit to insurance expense. In the 12th month, the final $10,000 will be fully expensed and the prepaid account will be zero...
Insurance Expense 1,000 Prepaid Insurance 1,000 This entry reduces the prepaid insurance asset by $1,000 and recognizes the monthly insurance expense of $1,000 on the income statement. By making adjusting entries at the end of each accounting period, the correct amount of prepaid expense is ...
It is a) true that an adjusting entry is required to recognize an expired expense. A common prepaid expense adjusted in this manner is insurance...Become a member and unlock all Study Answers Start today. Try it now Create an account Ask a question Our experts...