Homework Answers
Correct answer-----------(b) Debit prepaid insurance $3576, Credit insurance expense $3576
Working
| Insurance expense recorded | $ 8,582 |
| Actual insurance expense | $ 5,006 |
| Insurance expense recorded in excess | $ 3,576 |
| Prepaid insurance to be recorded | $ 3,576 |
Insurance will be recorded for only 7 months hence $3576 is recorded in excess. Prepaid insurance is for 5 month on december 31. (prepaid insurance = 8582/12 x 5=$3576)
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