Question

The balance in the prepaid insurance account, before adjustment at the end of the year, is $14,800. Journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment: the amount of unexpired insurance applicable to future periods is$3,600.

Solution

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Answered 10 months ago
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In this problem, we are asked to provide the adjusting journal entry for the prepaid insurance, which is a prepaid expense.

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accounting

At the end of June, the first month of operations, the following selected data were taken from the financial statements of Beth Cato, an attorney:

 Net income for June $80,000 Total assets at June 30500,000 Total liabilities at June 30200,000 Total owner’s equity at June 30300,000\begin{array}{lr} \text { Net income for June } & \$ 80,000 \\ \text { Total assets at June } 30 & 500,000 \\ \text { Total liabilities at June } 30 & 200,000 \\ \text { Total owner's equity at June } 30 & 300,000 \end{array}

In preparing the financial statements, adjustments for the following data were overlooked: a. Supplies used during June, $1,500. b. Unbilled fees earned at June 30,$18,000. c. Depreciation of equipment for June, $3,000. d. Accrued wages at June 30,$1,200.

Instructions

  1. Journalize the entries to record the omitted adjustments.
  2. Determine the correct amount of net income for June and the total assets, liabilities, and owner’s equity at June 30. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the following. Adjustment (a) is presented as an example.

NetTotalTotalTotal Owner’sIncomeAssets=Liabilities+EquityReported amounts$80,000$500,000$200,000$300,000Corrections:Adjustment (a)1,5001,50001,500Adjustment (b)Adjustment (c)Adjustment (d)Corrected amounts\begin{array}{lrrrr} &\textbf{Net}&\textbf{Total}&\textbf{Total}&\textbf{Total Owner's}\\ &\textbf{Income}&\textbf{Assets}&=\textbf{Liabilities}+&\textbf{Equity}\\\hline \text{Reported amounts}&\$80,000&\$500,000&\$200,000&\$300,000\\ \text{Corrections:}\\ \hspace{5pt}\text{Adjustment (a)}&-1,500&-1,500&0&-1,500\\ \hspace{5pt}\text{Adjustment (b)}\\ \hspace{5pt}\text{Adjustment (c)}\\ \hspace{5pt}\text{Adjustment (d)}\\ \text{Corrected amounts}\\ \end{array}

accounting

At the end of March, the first month of operations, the following selected data were taken from the financial statements of Kurt Reibel, an attorney:

 Net income for March $150,000 Total assets at March 31 1,000,000 Total liabilities at March 31 350,000 Total owner’s equity at March 31 650,000\begin{array}{lr} \text { Net income for March } & \$ 150,000 \\ \text { Total assets at March 31 } & 1,000,000 \\ \text { Total liabilities at March 31 } & 350,000 \\ \text { Total owner's equity at March 31 } & 650,000 \end{array}

In preparing the financial statements, adjustments for the following data were overlooked: a. Unbilled fees earned at March 31, $15,000. b. Depreciation of equipment for March,$9,000. c. Accrued wages at March 31, $3,500. d. Supplies used during March,$2,000

Instructions

  1. Journalize the entries to record the omitted adjustments.
  2. Determine the correct amount of net income for March and the total assets, liabilities, and owner’s equity at March 31. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the following. Adjustment (a) is presented as an example.

NetTotalTotalTotal Owner’sIncomeAssets=Liabilities+EquityReported amounts$150,000$1,000,000$350,000$650,000Corrections:Adjustment (a)+1,500+1,5000+1,500Adjustment (b)Adjustment (c)Adjustment (d)Corrected amounts\begin{array}{lrrrr} &\textbf{Net}&\textbf{Total}&\textbf{Total}&\textbf{Total Owner's}\\ &\textbf{Income}&\textbf{Assets}&=\textbf{Liabilities}+&\textbf{Equity}\\\hline \text{Reported amounts}&\$150,000&\$1,000,000&\$350,000&\$650,000\\ \text{Corrections:}\\ \hspace{5pt}\text{Adjustment (a)}&+1,500&+1,500&0&+1,500\\ \hspace{5pt}\text{Adjustment (b)}\\ \hspace{5pt}\text{Adjustment (c)}\\ \hspace{5pt}\text{Adjustment (d)}\\ \text{Corrected amounts}\\ \end{array}