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It Is A Revenue Account And Has A Credit Balance. 1.cash in bank 2. medicare tax payable 3.capital stock 4.sales returns and allowances 5.transportation in 6.rent expense 7.federal corporate income tax payable 8.sales discounts 9.purchases 10.accounts payable 11.supplies expense 12.prepaid insurance 13.accounts receivable 14.office equipment 15.retained earnings 16.payroll tax expense 17.purchases discounts 18.sales 19.supplies … Your review of the ledger reveals that each account has a normal balance. April 1, paid cash for one-year policy, $18,000; December 31, unexpired premiums, $4,500 asset, debit. For example, on September 01, 2020, the company ABC Ltd. pays $1,200 for one year of fire insurance which covers from September 01, 2020. 8. emdjay23. Journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment: (a) the amount of insurance expired during the year is $20,250; (b) the amount of unexpired insurance applicable to future periods is $6,750. Which of the following statements is In this case, it needs to account for prepaid insurance by properly making journal entries in order to avoid errors that could lead to misstatement on both balance sheet and income statement. The $200 transferred out of prepaid insurance is posted as a debit to the Insurance Expense account to show how much insurance has … Which of the following statements is correct? For this reason the account balance for items on the left hand side of the equation is normally a debit and the account balance for items on the right side of the equation is normally a credit. Supplies used during the year amount to $ 1,800. And if the accident / insurance event occurs, the insurance company will bear all or all of the costs in full or in part. Prepaid Insurance: Prepaid Insurance is an asset account that has a normal debit balance that can be found in the balance sheet. Get an answer. 5. The beginning balance of Prepaid Insurance: (5 pts) $5,000 2. Log in for more information. Worksheet (Use the information from the trial balance in Exam Figure 2. The type of account and normal balance of Prepaid Rent is. Insurance Accrual. Effect of Prepaid Expenses on Financial Statements Search for an answer or ask Weegy. What is an example of an account that has a normal credit balance? Cash B. A two year, $1,800 insurance policy was purchased on June 1 and recorded to prepaid insurance expense. Prepaid Insurance for $980. Hence, prepaid insurance journal entry does not affect the total assets because it increases one asset account and decreases another asset account at the same amount. Questions; accounting. Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company's balance sheet. liability: A declared dividend is classified as a(n) _____ . The company used $980 of insurance during the month. The Prepaid Insurance Account Has A Normal Balance Of $3,750 At The Beginning Of The Month. The company used $980 of insurance during the month. Assets. A company has an asset account, Prepaid Insurance, with a balance of $3,750 at the beginning of the month. As of November 30 none of the $2,400 cost has expired and the entire $2,400 will be reported on the balance sheet as Prepaid Insurance or Prepaid Expenses. Debit. business. Retained earnings and stockholders' equity should decrease because of this transaction. The basic accounting equationcan be stated as follows: Debit simply means on the left side of the equation, whereas credit means on the right hand side of the equation as summarized in the table below. The initial entry is a debit of $12,000 to the prepaid insurance (asset) account, and a credit of $12,000 to the cash (asset) account. The company should credit Insurance Expenses for $980 and debit Prepaid Insurance for … At the payment date of prepaid insurance, the net effect is zero on the balance sheet; and there is nothing to record in the income statement. Which of the following statements is correct? B. accounts payable/ Jones supply. Which of the following statements is true? The initial entry is a debit of $12,000 to the prepaid insurance (asset) account, and a credit of $12,000 to the cash (asset) account. Create a T-account for Prepaid Insurance, post any entries that affect the account, and tally the ending balance for the account (assume Prepaid Insurance beginning balance of $9,000). Hence, the company will need to make journal entry for insurance expense as below: In this case, if the company does not make the insurance expense journal entry above in the month-end adjusting entry, the September expenses will be understated by $100 while the total assets will be overstated by $100 as at September 30, 2020. Cash g. Interest Receivable b. Prepaid Insurance. What is an example of an account that has a normal credit balance? Therefore, prepaid insurance must be adjusted: Note: One month corresponds to $2,000 ($24,000 x 1/12) in insurance policy. After cash dividends are paid, the company’s balance sheet does not have any accounts associated with dividends. Cash B. Dec 31 Service Supplies Expense 900.00 Service Supplies 900.00 The “Service Supplies Expense” is an expense account while “Service Supplies” is an asset. percentage: Many businesses use a _____ of total sales on account to estimate uncollectible accounts expense. Liabilities and a credit blance C. Owner's Equity and a credit balance D. Owner's equity and a debit balance . Likewise, the company can make insurance expense journal entry by debiting insurance expense account and crediting prepaid insurance account. s. Log in for more information. increase. As shown below, the balance remaining in the Prepaid Insurance account is $2,200 after the adjusting entry is posted. Debit. $120,000 : Insurance Accrual : $120,000 . As a result, the company decides to debit Prepaid Insurance when the amount is paid semiannually. the type of account and normal balance of prepaid insurance is is a tool to reduce your risks. Which pair of accounts follows the rules of debit and credit, in relation to increases and decreases, in the same manner? 2. Of the prepaid insurance in the trial balance, $ 4,000 is for coverage during the months after December 31 of the current year. So, a prepaid account will always be represented on the balance sheet as an asset or a liability. The balance in the Prepaid Rent account is for a 12-month period that started October 1 of the current year. c. increase Equipment with a debit and the normal balance is a debit. In each successive month for the next twelve months, there should be a journal entry that debits the insurance expense account and credits the prepaid expenses (asset) account. Each month, the firm would deduct $2,000 from its prepaid expenses on the balance sheet, transferring the amount to a monthly rent expense line on the income statement.By the end of the year, the full $24,000 would show as various expenses on the income statement, and there would be $0 left in the prepaid expense asset account shown in the current asset section of the balance sheet. Which pair of accounts follows the rules of debit and the company credit. 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