a. Use the horizontal model or write the journal entry to record the payment of a one-year
Question:
a. Use the horizontal model or write the journal entry to record the payment of a one-year insurance premium of $6,000 on March 1, 2019.
b. Use the horizontal model or write the adjusting entry that will be made at the end of every month to show the amount of insurance premium “used” that month.
c. Calculate the amount of prepaid insurance that should be reported on the December 31, 2019, balance sheet with respect to this policy.
d. If the premium had been $12,000 for a two-year period, how should the prepaid amount at December 31, 2019, be reported on the balance sheet?
e. Why are prepaid expenses reflected as an asset instead of being recorded as an expense in the accounting period in which the item is paid?
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a To record the payment of a oneyear insurance premium b To record the expiration of prepaid insuran...View the full answer
Accounting What the Numbers Mean
ISBN: 978-1260565492
12th edition
Authors: David Marshall, Wayne McManus, Daniel Viele
