Questions
Unknown Question Type
Mountaineer Excavation operates in a low-lying area that is subject to heavy rains and flooding. Because of this, Mountaineer purchases one year of flood insurance in advance on March 1, paying $33,600 ($2,800 per month). Required: 1.&2. Record the necessary entries in the Journal Entry Worksheet below. 3. Calculate the year-end adjusted balances of Prepaid Insurance and Insurance Expense (assuming the balance of Prepaid Insurance at the beginning of the year is $0).
View Explanation
Verified Answer
Please login to view
Step-by-Step Analysis
Beginning the analysis, I will examine each proposed item in turn to understand what it represents and whether it aligns with proper accounting for a one-year flood insurance policy purchased on March 1.
Option 1: Journal Entry 1 (March 1): Debit Prepaid Insurance $33,600, Credit Cash $33,600.
This entry records the initial payment for a one-year insurance policy. Since the benefit extends over future periods (12 months) and the company pays cash upfront, it is appropriate to recognize the asset Prepaid Insurance and reduce Cash by the same amount. This matches the concept of prepaying for a serv......Login to view full explanationLog in for full answers
We've collected over 50,000 authentic exam questions and detailed explanations from around the globe. Log in now and get instant access to the answers!
Similar Questions
Paddy Co purchased a 1 year insurance on 1 April 2024 for $24000. What adjustment entry will the Accountant record on 31st Dec 2024?
Paddy Co. bought a 1 year insurance on 1 October 2024 for $12000. What adjustment entry will Paddy record on 31 October 2024?
On April 1, 2024, the premium on a one-year insurance policy was purchased for $3,000 cash with the insurance coverage beginning on that date. The books are adjusted only at year-end. Which of the following correctly describes the effect on the financial statements of the December 31, 2024 adjusting entry?
Eve's Apples opened its business on January 1, 2027, and paid for two insurance policies effective that date. The policy for equipment damage was $37,260 for 18 months, and the crop damage policy was $12,600 for a two-year term. What is the balance in Eve's prepaid insurance as of December 31, 2027?
More Practical Tools for Students Powered by AI Study Helper
Making Your Study Simpler
Join us and instantly unlock extensive past papers & exclusive solutions to get a head start on your studies!