On June 1st 2017, Braxton Corp purchases 3-years of prepaid insurance for $5,400. What would be...
On June 1st 2017, Braxton Corp purchases 3-years of prepaid insurance for $5,400. What would be the amount of prepaid insurance listed under current assets on Braxton Corp's 2019 Balance Sheet (as of December 31st 2019)?
Homework Answers
Ans. The amount of prepaid insurance listed under current assets on Braxton Corp's 2019 is Nill
Journal Entry For Prepaid insurance for 3 years
| DATE | PARTICULARS | DEBIT | CREDIT |
| 01-06-2017 | Prepaid insurance | $5,400 | |
| To cash | $5,400 | ||
| (prepaid a 3 years policy) | |||
| 31-03-2017 | Insurance Expenses | $1,800 | |
| To Prepaid insurance | $1,800 | ||
| (Being adjust prepaid insurance to reflect expired portion $5,400 / 3 years) |
So in 2017 balance sheet show Prepaid insurance is ($5,400 - $1,800) = $3,600
| DATE | PARTICULARS | DEBIT | CREDIT |
| 31-03-2018 | Insurance Expenses | $1,800 | |
| To Prepaid insurance | $1,800 | ||
| (Being adjust prepaid insurance to reflect expired portion ) |
So in 2018 balance sheet show Prepaid insurance is ($3,600 - $1,800) = $1,800
| DATE | PARTICULARS | DEBIT | CREDIT |
| 31-03-2019 | Insurance Expenses | $1,800 | |
| To Prepaid insurance | $1,800 | ||
| (Being adjust prepaid insurance to reflect expired portion ) |
So in 2018 balance sheet show Prepaid insurance is ($1,800 - $1,800) = Nill
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