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myrzilka
1 month ago
10

Mouse Inc. uses the alternative method of accounting for prepayments and purchased a $1,200, 6-month insurance policy. The compa

ny immediately debited the Insurance expense account. By the end of the period, $400 of the policy had expired. Demonstrate the required adjustment needed at the end of the period.
Business
1 answer:
harina [3.8K]1 month ago
3 0

Explanation:

The journal entry necessary to document the specified adjustment is outlined as follows:

At the end of the year

Insurance expense A/c Dr. A/c $800

       To Prepaid Insurance A/c $800

(Recording of insurance expense)

The calculation is presented as:

= Prepaid amount for 6 months insurance - insurance that has expired

= $1,200 - $400

= $800

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