CdnLynx
Jun 3, 2009, 08:02 PM
Hello,
I need some help with understanding how to journalize a transaction using the Alternative treatment of prepaid expenses and unearned revenues.
A company purchased a one year insurance policy on August 1, 2008 for $4740 cash. Assuming year end is December 31, 2008. PART 1. I need to prepare a journal entry, assuming that prepaid cost as expenses. PART 2. I need to prepare the adjusting entry on December 31, 2008, assuming that prepaid cost as expenses.
I understand Part 1.
Debit Credit
Aug 1 Insurance Expense 4,740
Cash 4,740
I am confused with Part 2. Do I have to prepare journal entries for every month, Sept, Oct, etc... or I am I just preparing one entry for the year end Dec 31, 2008? If this is correct would Part to be
Part 2
Dec 31 Prepaid Insurance 2,765
Insurance Expense 2,765
Thanks
I need some help with understanding how to journalize a transaction using the Alternative treatment of prepaid expenses and unearned revenues.
A company purchased a one year insurance policy on August 1, 2008 for $4740 cash. Assuming year end is December 31, 2008. PART 1. I need to prepare a journal entry, assuming that prepaid cost as expenses. PART 2. I need to prepare the adjusting entry on December 31, 2008, assuming that prepaid cost as expenses.
I understand Part 1.
Debit Credit
Aug 1 Insurance Expense 4,740
Cash 4,740
I am confused with Part 2. Do I have to prepare journal entries for every month, Sept, Oct, etc... or I am I just preparing one entry for the year end Dec 31, 2008? If this is correct would Part to be
Part 2
Dec 31 Prepaid Insurance 2,765
Insurance Expense 2,765
Thanks