Wk $3-$ Discussion Topic #$2($Prepaid Expenses & Unearned Revenues$)$

Please complete both parts.

accounting experience and he does not remember very much from the crash$-$course accounting seminar he recently attended.

Part I

Benny sees that Bill recorded the transaction as follows:

July $7,20$ Y$8$ Prepaid Insurance $($DR$)$ $$75,000$

Cash $(CR),$$$75,000$

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 expense account at December ${31}^{st?}?$

Part II

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$,$ he'll 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?