Please complete both parts.

Bill Henrickson, the owner of Ace Plus (a new hardware store chain), recently hired his 18-year-old son, Benny, to work in the accounting office. Ace Plus uses the accrual basis of accounting. Right now, money is really tight and Bill cannot afford to hire an experienced accountant. Benny has no accounting experience and he does not remember very much from the crash-course accounting seminar he recently attended.

Part I

Faced with a huge pile of paperwork, Benny begins his first day as an accountant on August 31, 20Y8. Right away, Benny sees an insurance invoice that was paid in full by his father, Bill, on July 7, 20Y8. The $75,000 invoice was for insurance coverage from August 1, 20Y8 through January 31, 20Y9.

Benny sees that Bill recorded the transaction as follows:

July 7, 20Y8 Prepaid Insurance (DR) $75,000

Cash (CR) $75,000

Benny is not sure if he needs to make any adjusting journal entries so he asks his dad about it. "You're the accountant, son. Im just the owner." Bill replies as he pats Benny on the shoulder and leaves the room. No other journal entries have been made to the Prepaid Insurance account since July 7^th.

Please answer the following:

(1) What type of account is Prepaid Insurance?

(2) Did Bill record the July 7^th transaction properly? Please explain.

(3) Should Benny make adjusting journal entries for the remaining months of the prepaid insurance policy? If so, what should the August 31^st adjusting journal entry look like?

(4) Assuming no other prepaid transactions, what will be the balance in the Prepaid Insurance account at December 31^st?

You must make the actual journal entries. Do not just describe them.

Part II

In addition to the facts above, Benny found a cash receipt for a $4,500 carpet installation that was paid for by a customer on August 15^th but not scheduled for installation until October 20^th. At the time of payment, Bill (the owner) recorded it as follows:

August 15, 20Y8 Cash (DR) $4,500

Installation Revenue (CR) $4,500

Benny thinks something is wrong with that journal entry but he knows if he asks his dad about it, hell probably get the same unhelpful answer as before.

(1) Was Bill's August 15^th journal entry correct? If not, what do you think Bill should have done?

(2) What would Benny's correcting journal entry look like?

(3) What journal entry, if any, should Benny record after the October 20^th installation is successfully completed?

You must make the actual journal entries. Do not just describe them