Recording Insurance Expense Eld Company reported prepaid insurance of $40,000 on January | on a flood insurance policy that provides coverage until August 31. Because of increased claims due to substantial flooding problems in the area, the twelve-month premium paid on September | was increased to $84,000 and was recorded by Eld as follows:

No other entries relating to insurance expense were recorded during the year.

a. What amount of insurance expense should Eld Company report for the year?

b. If no adjusting entry is made at year-end, what will be the effect on reported net income and balance sheet accounts?

c. Give the adjusting entry Eld Company must record at December 31 to ensure the appropriate amounts are reported.

Transcribed Image Text:

Insurance Expense Cash 84,000 84,000