Insurance Premium Expired Adjusting Entry
This is accomplished with a debit of 1 000 to insurance expense and a credit of 1 000 to prepaid insurance.
Insurance premium expired adjusting entry. On december 31 an adjusting entry will debit insurance expense for 400 the amount that expired. You will get a. The total premium for each policy was paid in full for all months at the purchase date and the prepaid insurance account was debited for the full cost. Explanation of solution workers compensation insurance premium.
On december 31 2016 the expired portion of prepaid insurance 1 800 3 12 450 will be converted into expense by making the following adjusting entry. Over time the asset account shrinks and the insurance expense account increases. If expense method is used. Workers compensation insurance premium are usually paid in advance based on their estimated payroll during the period.
The adjusting entry to record expired insurance would be to debit a. The second entry will be the financing portion. Adjusting journal entry as the prepaid rent expires. Prepaid insurance cash and 26.
For the financing of insurance premium the entries are also simple but there will be two entries this time instead of one. Insurance expense prepaid insurance b. Cash insurance expense d. This means that the debit balance in prepaid insurance at december 31 will be 2 000 5 6 of the 2 400 cost since this is the amount that has not yet expired.
Year end adjusting entries for prepaid insurance were properly recorded in all prior years. In the entry above we are actually transferring 4 000 from the asset to the expense account i e from prepaid insurance to insurance expense. These statements are key to both financial modeling and. Provide the adjusting entry for the expired worker s compensation premium.
If blue sky uses expense method the whole amount of 1 800 will be recorded as expense by making the following journal entry on october 1 2016. Salaries expense cash b. Prepaid insurance is insurance paid in advance and that has not yet expired on the date of the balance sheet balance sheet the balance sheet is one of the three fundamental financial statements. Of the total six month insurance amounting to 6 000 1 000 per month the insurance for 4 months has already expired.
Entry 2 3. On december 31 the company writes an adjusting entry to record the insurance expense that was used up expired and to reduce the amount that remains prepaid. You will find someone to finance your insurance. 1 6 of 2 400 and will credit prepaid insurance for 400.
If you pay insurance ahead of time the portion you haven t used yet is unexpired in accounting terms. The adjusting entry to record accrued salaries would be debit credit a. Initial journal entry for prepaid rent.
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