The prepaid insurance account had a balance of $11,200 at the beginning of the year. The account was increased for $7,500 for premiums on policies purchased during the year. What is the adjustment required at the end of the year for each of the following independent situations? For each account affected, indicate whether the account is increased or decreased and the amount of the increase or decrease. a.  The amount of unexpired insurance applicable to future periods is $10,500. Insurance Expense   $fill in the blank 2 Prepaid Insurance   $fill in the blank 4 b.  The amount of insurance expired during the year is $14,200. Insurance Expense   $fill in the blank 6 Prepaid Insurance   $fill in the blank 8

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The prepaid insurance account had a balance of $11,200 at the beginning of the year. The account was increased for $7,500 for premiums on policies purchased during the year. What is the adjustment required at the end of the year for each of the following independent situations? For each account affected, indicate whether the account is increased or decreased and the amount of the increase or decrease.

a.  The amount of unexpired insurance applicable to future periods is $10,500.

Insurance Expense   $fill in the blank 2
Prepaid Insurance   $fill in the blank 4

b.  The amount of insurance expired during the year is $14,200.

Insurance Expense   $fill in the blank 6
Prepaid Insurance   $fill in the blank 8
Expert Solution
Step 1

As per accounting principle expenses should be booked only on the basis of respective financial year or calender year, so if expense is related to future years then prepaid expenses should be booked.

 

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