A business keeps its accounts on a calendar-year basis.On January 1,2013,there is a balance of $2,800 in the Prepaid insurance account.The insurance represented by that amount expires on March 31,2013,but the business makes no entry to record the expiration of the insurance until its year-end.On April 1,2013,the business pays $16,000 for an insurance policy covering the period April 1,2013 - March 31,2014.Prepare the journal entry at December 31,2013,to record the full amount of insurance expense for the year.

Question

Quizplus · Accepted Answer

The Answer of A business keeps its accounts on a calendar-year basis.On January 1,2013,there is a balance of $2,800 in the Prepaid insurance account.The insurance represented by that amount expires on March 31,2013,but the business makes no entry to record the expiration of the insurance until its year-end.On April 1,2013,the business pays $16,000 for an insurance policy covering the period April 1,2013 - March 31,2014.Prepare the journal entry at December 31,2013,to record the full amount of insurance expense for the year.

A Business Keeps Its Accounts on a Calendar-Year Basis