ACCOUNTING plz help thnx
Answers
To record the insurance expense for the year ending December 31, 2008, the following adjusting entry should be made: Debit Insurance Expense $31,200 Credit Prepaid Insurance $31,200 First, calculate the remaining months of coverage for each of the policies on December 31, 2008. Policy A had 24 months of coverage, but was purchased on April 1, 2007 and the current year is 2008, which means that 16 months of coverage remain on December 31, 2008. Policy B had 36 months of coverage and was purchased on April 1, 2008. Since the current year is 2008, that means that 28 months of coverage remain on December 31, 2008. Policy C had 12 months of coverage and was purchased on August 1, 2008. Since it is December 31, 2008, 8 months of coverage remain. So, the total remaining coverage for the three policies on December 31, 2008 is 16 + 28 + 8 = 52 months. Now calculate the total insurance expense for the year ending December 31, 2008 by multiplying the total remaining coverage (52) by the total premiums for each policy ($34,600). The total insurance expense for the year ending December 31, 2008 is $1,794,400 ($34,600 x 52). The amount to be debited to Insurance Expense and credited to Prepaid Insurance is the difference
