Loose Leaf for Fundamental Accounting Principles
Loose Leaf for Fundamental Accounting Principles
23rd Edition
ISBN: 9781259687709
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 3, Problem 5QS
To determine

Concept Introduction:

Prepaid expenses - Prepaid expenses are part of accounting adjustment entries which are recorded in the closing period of the entity. These are those expenses which have not yet incurred but have been paid in advance. These are recorded in the books following the matching principle of accounting.

To determine:

1. The current account balance,

2. The current account balance, and

3. The necessary adjusting entry as on December 31.

Expert Solution & Answer
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Explanation of Solution

a.
1. The current prepaid insurance account balance = $4,700

2. The prepaid insurance account balance as on Dec.31 = $ 900

3. The adjustment entry

Particulars Debit Credit
Insurance expense 3,800
To Prepaid Insurance Account 3,800

b.
1. The current prepaid insurance account balance = $5,890
2. The prepaid insurance account balance as on Dec.31 = $ 4,850
3. The adjustment entry

Particulars Debit Credit
Insurance expense 1,040
To Prepaid Insurance Account 1,040

Working:Prepaid Insurance account balanceasonDec.31=Balanceinthestart-Policiesexpired=5,890-1,040=4,850

c.
1. The current prepaid rent account balance = $24,000
2. The prepaid rent account balance as on Dec.31 = $ 20,000
3. The adjustment entry

Particulars Debit Credit
Rent expense 4,000
To Prepaid Rent Account 4,000

Working:Prepaid rent account balanceasonDec.31=Balanceinthestart-Rentperiodexpired=24,000-(24,000×4/24)=20,000

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Chapter 3 Solutions

Loose Leaf for Fundamental Accounting Principles

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