Hi I need help on what is the answer for question number 3 in this question. The answer for question 1 and 2 is already given. I hope that you can help me and answer with explanation please. Thank you
Question
11:10 .all all 82 did-feeh-ihm G A The adjusting Process Assignment, Prepare the adjusting entries on December 31, 2010, the end of the annual accounting period, based on the following independent data Show your computations: The insurance expense account had a debit balance on December 31, 2010 of P/2,000 representing premium for a 2-year fire insurance policy effective Dec 1, 2010 Rent income was credited for P36,000 on November 1, 2010 representing 9-months rent collected in advance" As of December 31, 2010 commission already earned but not yet collected amount to P38,000 O Rebecca Sambu R You Rebecca Merrygrace 17 others O O1st question: Debit Prepaid Insurance 89,000 Credit Insurance Expense: 89,000 2nd question: Debit Rental Income 28,000 Credit Rental Income 28,000 Explanation: 1st Question: It indicates that the first problem uses the expense method in recording its purchase of insurance policy the original entry on 12/1/2010 is Debit expense Y2,000 and credit cash of ?2,000 the whole amount of ?2,000 covers the 2yr life insurance policy [24 months} eective decem her 1 . Thus expenses recorded for the year is overstated rthere are still 23months of unexpired portion of the insurance 72,000X24'23 =89,000 Which will be your adjusting journal entry to correct the initially recognized insurance expense and recognizing the unexpired portion of the insurance policy as an asset account under prepaid insurance. Insurance expense should only be 3,000 (T2kl24mos'1month) the expired portion from december131. 2nd question: The original entry made when rent income was recieved is debit cash of 38k and credit rent income 38k on november 1 which covers a 9 mo nth advance rent thus overstating your recognized income at dec 31. At december 31 rent income recognized should only be 8,000 [36.000/9months*2) which covers the only earned portion trom november1 to december 31, thus you need to debit 28,000 on rental income and a credit of 28000 unearned income .The unearned income portion covers the 7months remaining rent
