ALEXS purchase instructions FIN 360Spring 2018L ALEXS Gritti

ALEXS purchase instructions FIN 360-Spring 2018-L ALEXS: Grittin Douglas Consuting Track Daly Scheduio Spri ALEKS Gritfin Douglas Question #5 On August 1, Bailey Company paid $9,600 for two years of insurance in advance. Bailey Company recorded the transaction by debiting Prepaid Insurance and crediting Cash. Required Journalize the adjusting entry on December 31. ate Account Tle Credt 1311-Choose one) Dec. Advertising Expense Depreciation Expense Prepaid Advertising Prepaid insurance Clear Undo Supplies Supples Expense Unearned Rent Revenue SCORE 6 MacBook Pro

Solution

The insurance cost per month = $400 (9600/24)

For period August to December i.e. 5 months, the cost would be $2,000 (400*5)

The adjusting entry shall be:

Insurance Exp ( Dr. ) 2,000

Prepaid Insurance (Cr.) 2,000