Question

On 10/1/21, XYZ paid KLM 12,000 for a one year fire insurance policy. 1.)If XYZ recorded the purchase of insurance to a permanent account, the adjusting entry on 12/31/21 is: if the company fails to make an adjusting entry, the impact on the accounting equation is: 1 2.) If XYZ recorded the purchase of insurance to a temporary account, the adjusting entry on 12/31/21 is: "Dr pre payss if the company fails to make an adjusting entry, the impact on the accounting equation is: 3.) If XYZ's unadjusted trial balance shows 8,000 in prepaid insurance, the adjusting entry on 12/31/21 is: if the company fails to make an adjusting entry, the impact on the accounting equation is: 4.)If KLM recorded the receipt of payment for an insurance policy to a permanent account, the adjusting entry on 12/31/21 is: if the company fails to make an adjusting entry, the impact on the accounting equation is:

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet. For detailed answer refer to the supporting sheet. As per HomeworkLib policy we are required to solve the first 4 parts. For remaining parts you have to post seperate question. Thank You

1 Answer Debit Credit 3000 2 Part 1) 3 Date 4 12/31/21. 5 6 7 Particular Insurance expense Prepaid Insurance (3*12000/12) (To record insurance expense) 3000 8 9 10 Impact 11 Stockholders Equity will be overstated by $ 3000 and assets will be overstated $ 3000 12 13 Part 2) 14 Date Particular Debit Credit 15 12/31/21. Prepaid insurance ( 9/12*12000) 9000 16 Insurance expense 9000 17 (To record prepaid insuance) 18 19 20 21 Impact 22 Stockholders Equity will be understated $ 9000 and assets will be understated by $ 9000 3

24 Part 3) 25 Date Particular Debit Credit 26 12/31/21 Prepaid insurance (9/12*12000)-8000) 1000 27 Insurance expense 1000 28 (To adjust prepaid insurance) 29 30 31 32 Impact 33 Stockholders Equity will be understated $ 1000 and assets will be understated by $ 1000 34 35 36 Part 3) 37 Date Particular Debit Credit 38 12/31/21. Unearned Revenue 3000 39 Insurance revenue (3*12000/12) 3000 40 (To adjust prepaid insurance) 41 42 43 44 Impact 45 Stockholders Equity will be understated $ 3000and liabilities will be overstated by $ 3000 46