Asked by Benjamin Leonard on Jun 15, 2024
Verified
On March 1, a business paid $3,600 for a 12-month liability insurance policy. On April 1, the business entered into a two-year rental contract for equipment at a total cost of $18,000. Determine the following amounts:
(a) Insurance expense for the month of March
(b) Balance in prepaid insurance as of March 31
(c) Equipment rent expense for the month of April
(d) Balance in prepaid equipment rental as of April 30
Liability Insurance
A type of insurance that provides protection against claims resulting from injuries and damage to people and/or property.
Rental Contract
A written or verbal agreement between a lessor and lessee that stipulates the terms and conditions under which a property, vehicle, or piece of equipment is rented.
Prepaid Insurance
An asset account representing insurance payments made in advance for coverage extending beyond the current accounting period.
- Evince the expertise in establishing journal entries for common adjustments such as prepayments, accruals, and depreciation.
- Calculate and record adjustments for prepaid and accrued expenses.
Verified Answer
($3,600/12 = $300)
(b)$3,300
($3,600 - $300 = $3,300)
(c)$750
($18,000/24 = $750)
(d)$17,250
($18,000 - $750 = $17,250)
Learning Objectives
- Evince the expertise in establishing journal entries for common adjustments such as prepayments, accruals, and depreciation.
- Calculate and record adjustments for prepaid and accrued expenses.
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