Question: The following errors took place in journalizing transactions a A purchase

The following errors took place in journalizing transactions:
a. A purchase of a one-year insurance policy was recorded as a debit to Insurance Expense of $2,730 and a credit to Accounts Payable of $2,730. The company records its prepaid expenses to the balance sheet account.
b. Cash was received for prepaid rent. A rent deposit for four months of $6,000 was debited to Cash and credited to Fees Earned. The company records prepaid rent to a balance sheet account.
c. A $65 cash purchase for refreshments for the staff was erroneously posted as a $56 debit to Miscellaneous Expense and a $56 credit to Accounts Payable.
d. A debit of $2,100 to Accounts Receivable and a credit of $2,100 to Fees Earned were missed.
1. Journalize the entries to correct the errors. Include explanations.
2. Explain why, in transaction a., the insurance policy is not considered an expense.

  • CreatedSeptember 15, 2015
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