Kreative Kitchens purchased a 1year insurance policy on 1 March 2019. The entire premium of $9000 was
Question:
Kreative Kitchens purchased a 1‐year insurance policy on 1 March 2019. The entire premium of $9000 was recorded by debiting Prepaid Insurance. Ignore GST.
Required
(a) Give the adjusting entry at 30 June for the year ending 30 June 2019.
(b) What amount should be reported in the 30 June 2019 balance sheet for Prepaid Insurance?
(c) If no adjusting entry was made on 30 June, by how much would profit be overstated or understated? Would assets be overstated or understated? Explain.
(d) What would your adjusting entry in requirement (a) be if the premium of $9000 was recorded by debiting Insurance Expense?
Step by Step Answer:
a The adjusting entry at 30 June for the year ending 30 June 2019 would involve recognizing the portion of the prepaid insurance that has expired Assu...View the full answer
Financial Accounting
ISBN: 9780730363217
10th Edition
Authors: John Hoggett, John Medlin, Keryn Chalmers, Claire Beattie, Andreas Hellmann, Jodie Maxfield
