Adjustment for Prepaid Insurance The prepaid insurance account had a balance of

Question

Adjustment for Prepaid Insurance

The prepaid insurance account had a balance of $9,600 at the beginning of the year. The account was increased for $28,800 for premiums on policies purchased during the year. What is the adjustment required at the end of the year for each of the following independent situations? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease.

For (a) and (b), indicate whether each account is increased or decreased and the amount of the increase or decrease.

a. The amount of unexpired insurance applicable to future periods is $12,000.

Insurance expense

$

Prepaid insurance

$

b. The amount of insurance expired during the year is $31,200.

Insurance expense

$

Prepaid insurance

$

Insurance expense

$

Prepaid insurance

$

Explanation / Answer

a Insurance expense Increase 26400 =9600+28800-12000 Prepaid insurance Decrease 26400 b Insurance expense Increase 31200 Prepaid insurance Decrease 31200

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