From our computations in Requirement 2 we know that the company incurred 3

From our computations in requirement 2 we know that

This preview shows page 17 - 23 out of 25 pages.

Image of page 17
Image of page 18
20162016.As of December 31, only two months' prepayment has expired, leaving the remaining month(s) (threethree-month total prepayment less two months expired) of insurance still prepaid. At December 31, 20162016, the company must transfer the unexpired portion of the original prepayment from the expense account to the prepaid asset account. From our computations in Requirement 2, we know that the company incurred $ 2 comma 000$2,000 of insurance expense related to this transaction through December 31, 20162016. Thus $ 1 comma 000$1,000 (= $ 3 comma 000$3,000 - $ 2 comma 000$2,000) should not be included in expenses, but rather should be recorded as an asset as of December 31, 20162016. To record this entry, we must increase Prepaid Insurance and reduce Insurance Expense by $ 1 comma 000$1,000. Save Accounting Table... + Copy to Clipboard... + Date Accounts and Explanation Debit Credit Dec. 31 Prepaid Insurance 1,000
Image of page 19
Save Accounting Table... + Copy to Clipboard... +
Image of page 20
Image of page 21
$ 5 comma 000$5,000 - $ 1 comma 000$1,000) must be shifted from the Service Revenue account to the Unearned Revenue account.
Image of page 22
Image of page 23

You've reached the end of your free preview.

Want to read all 25 pages?

  • Fall '10
  • MANAGE
  • Revenue, Prepaid rent, Generally Accepted Accounting Principles, Double-entry bookkeeping system, Service Revenue, Accounting Table

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture