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adjusting accounting question 2?
Ward Company paid $15,600 for two years of insurance in advance. On December 1, Ward Company debited Insurance Expense, which is an alternate way of recording the initial expenditure.
Do the Adjusting Entries.
I said Debit Insurance Expense and Credit Prepaid Insurance for 650.
The Correct answer is Debit Prepaid Insurance and Credit Insurance expense for 14950, but you are not purchasing
1 Answer
- ?Lv 78 years agoFavorite Answer
15,600 / 24 = $650 monthly expiration of insurance
Since the whole amount (15,600) was originally debited to an expense account, when no expense had actually been accrued, the adjusting entry has to remove that portion of the expense that has not been accrued. It also has show that the left over amount is now an asset that will be expensed as it expires.
15,600 - 650 = 14,950
Dr Prepaid Insurance 14,950
Cr Insurance Expense 14,950
Source(s): Accounting Fan