Prepaid insurance: The Prepaid Insurance account has a $5,000 debit balance to start the year. A review of insurance policies and payments shows that $1,000 of unexpired insurance remains at the end of the year.
1. The beginning balance of Prepaid Insurance: (5 pts)

2. The amount to be adjusted (show your calculation): (5 pts)

3. The ending balance of the account after the adjustment (show your calculation): (5 pts)

4. Adjusting Journal Entry (please include description): (10 pts)
Date Account Debit Credit

Question

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roundadworthy roundadworthy · Answer 1 · 2020-01-26T23:50:28+01:00

Answer:

1. Beginning balance of Prepaid Insurance is $ 5,000

2. Amount to be adjusted = 5,000 - 1,000 = $ 4,000

3. Ending balance of the account after the adjustment = 5,000 - 4,000 = $ 1,000

4. December 31st:

Debit of $ 4,000 to Insurance Expense

Credit of $ 4,000 to Prepaid Insurance

Step-by-step explanation:

1. Beginning balance of Prepaid Insurance is $ 5,000

2. Amount to be adjusted = Beginning balance - ending balance

Amount to be adjusted = 5,000 - 1,000 = $ 4,000

3. Ending balance of the account after the adjustment = Beginning balance - amount to be adjusted

Ending balance of the account after the adjustment = 5,000 - 4,000 = $ 1,000

4. December 31st:

Debit of $ 4,000 to Insurance Expense

Credit of $ 4,000 to Prepaid Insurance