On December 31, 2015, Dab Industries reported a prepaid insurance expense account balance of $2,500 and...

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On December 31, 2015, Dab Industries reported a prepaid insurance expense account balance of $2,500 and during 2016 the overa

In June a company paid $400 for July utilities. Select the entry below to record the cash payment ОА. Utilities Expense 400 C

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Answer 1

Answer #1

Solution1:-Under accured method of accounting ,Insurance expenses for 2016 will be :-

Insurance expenses for year = beginning bal.of prepaid insurance account + cash payment for prepaid insurance + ending bal.for prepaid insurance

= $2500 + $ 5000 + ($2500-$1300)

=$2500 +$5000 - $1200 =$6300

Adjustment entry will be

Debit : Insurance expenses $6300

Credit: : Prepaid insurance $6300

Option C is correct.

Solution 2:-Under accrued method of accounting, Adjustment entry for advance payment of utilities expenses

Debit: Prepaid Utilities expenses $400

Credit: Cash $400

Option C is correct.

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Answer 2

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