Entity A prepays one-year insurance for 240,000 on September 1, 20x1
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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provide the answer for question 6 and 7

Transcribed Image Text:Use the following information for the next two questions:
Entity A prepays one-year insurance for #240,000 on September 1,
20x1.
6. If Entity A uses the asset method of initial recording of
prepayments of expenses, the year-end adjustment would
include a
a. debit to prepaid insurance of P80,000.
b. credit to prepaid insurance of P80,000.
c. debit to insurance expense of #160,000.
d. credit to insurance expense of P160,000.
onndd co lem bes
7. If Entity A uses the expense method of initial recording of
prepayments of expenses, the year-end adjustment would
-include a
air to
a. debit to prepaid insurance of #80,000.
b. credit to prepaid insurance of P160,000.
debit to insurance expense of P80,000.
d. credit to insurance expense of P160,000.
С.
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