Yahoo Answers is shutting down on May 4th, 2021 (Eastern Time) and the Yahoo Answers website is now in read-only mode. There will be no changes to other Yahoo properties or services, or your Yahoo account. You can find more information about the Yahoo Answers shutdown and how to download your data on this help page.

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

Relevance
  • ?
    Lv 7
    8 years ago
    Favorite 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
Still have questions? Get your answers by asking now.