whats your math on this to find it? On January 2, 2012, Superchunk purchased a g
ID: 2345284 • Letter: W
Question
whats your math on this to find it?
On January 2, 2012, Superchunk purchased a general liability insurance policy for $2,100 for coverage for the calendar year. The entire $2,100 was charged to Insurance Expense on January 2, 2012. If the firm prepares monthly financial statements, the proper adjusting entry on January 31, 2012, will be:
Prepaid Insurance 175
Insurance Expense 175
Insurance Expense 175
Prepaid Insurance 175
Prepaid Insurance 1,925
Insurance Expense 1,925
Insurance Expense 1,925
Prepaid Insurance 1,925
Explanation / Answer
Prepaid Insurance..................... 1,925
Insurance Expense..................................... 1,925
since its prepaid so the whole amount of 2100 has to paid upfront, but since they bought it on Jan 2 so it not the whole month. So that month wont be counted. so 2100-2100/12 = 1925
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