Journal entries for prepaid expenses- insurance

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Reference no: EM1310865

Journal entries for Prepaid expenses- insurance.

Prepaid expenses- insurance

a) Use the horizontal model or write the journal entry to record the payment of a one-year insurance premium of 3,000 on March 1.

b) Use the horizontal model or write the adjusting entry that will be made at the end of every month to show the amount of insurance premium "used" that month.

c) Calculate the amount of prepaid insurance that should be reported on the 31^st of August balance sheet with respect to this policy.

d) If the premium had been 6000 for the 2yr period, how should the prepaid amount at August 31 of the 1^st year is reported on the balance sheet?

e) Why are prepaid expenses reflected as an asset instead of being recorded as an expense in the accounting period in which the item is paid?

Reference no: EM1310865

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