The prepaid insurance is $7,200 and the data of unexpired insurance of $2,700 is needed to determine year end adjustment. What is the ending trial balance?
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The prepaid insurance is $7,200 and the data of unexpired insurance of $2,700 is needed to determine year end adjustment. What is the ending trial balance?
You have used up $4,500 of the value of the policy. Therefore, you would need to recognize the expense on this portion of the policy.
When the policy was first purchased (prepaid for) you recorded:
Dr. Prepaid Insurance 7200
Cr. Cash 7200
As the policy begins to expire, you recognize the expense. Since you haven't recorded anything so far, you need to recognize the full usage for the year, the 7200-2700, or 4500.
Dr. Insurance Expense 4500
Cr. Prepaid 4500
How do you post this transaction in a journal
On Oct 1st paid three months rent on a lease rental contract, $3,600
How do you post this transaction in a journal
On Oct 12 recorded services provided on account of $3,750
Prepaid rent:
DR. Prepaid rent 3600
CR. Cash 3600
As each month passes, you should reduce your prepaid by 1/3 (1 month) and recognize the rent expense.
DR. Rent Expense 1200
CR. Prepaid Rent 1200
Services on Account:
DR: Account Receivable 3750
CR: Service Revenue 3750
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