Ask Question
6 January, 07:23

On december 31, carmack company's prepaid insurance account had a balance before adjustment of $6,000. the insurance was purchased on july 1 of the same year for one year of insurance coverage, with coverage beginning on that date. the adjusting entry needed on december 31 is:

+4
Answers (1)
  1. 6 January, 09:43
    0
    Adjusting entry for Insurance Expense:

    In the given case, the insurance was purchased on July 1 of the same year for one year of insurance coverage, with coverage beginning on that date. It means the Insurance expense for the current year shall be calculated for the period (July 1 to Dec. 31) = 6 Months

    The Total amount paid for one year was $6,000. So the amount of expense for the current year shall be 6000*6/12 = $3,000

    Hence the adjustment entry shall be made for $3,000 Insurance expense. We shall debit Insurance expense and Credit the Prepaid Insurance. The

    Adjusting Journal entry as on Dec. 31 shall be as follows:

    Insurance Expense Debit $3,000

    Prepaid Insurance Credit $3,000
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “On december 31, carmack company's prepaid insurance account had a balance before adjustment of $6,000. the insurance was purchased on july ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers