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Concept Introduction:
Prepaid expenses - Prepaid expenses are part of accounting adjustment entries which are recorded in the closing period of the entity. These are those expenses which have not yet incurred but have been paid in advance. These are recorded in the books following the matching principle of accounting.
To determine:
1. The current account balance,
2. The current account balance, and
3. The necessary
![Check Mark](/static/check-mark.png)
Explanation of Solution
a.
1. The current prepaid insurance account balance = $4,700
2. The prepaid insurance account balance as on Dec.31 = $ 900
3. The adjustment entry
Particulars | Debit | Credit |
Insurance expense | 3,800 | |
To Prepaid Insurance Account | 3,800 |
b.
1. The current prepaid insurance account balance = $5,890
2. The prepaid insurance account balance as on Dec.31 = $ 4,850
3. The adjustment entry
Particulars | Debit | Credit |
Insurance expense | 1,040 | |
To Prepaid Insurance Account | 1,040 |
c.
1. The current prepaid rent account balance = $24,000
2. The prepaid rent account balance as on Dec.31 = $ 20,000
3. The adjustment entry
Particulars | Debit | Credit |
Rent expense | 4,000 | |
To Prepaid Rent Account | 4,000 |
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Chapter 3 Solutions
Fundamental Accounting Principles -Hardcover
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