adjusting entry questions


D

DanaLove10

Just need a little help on some homework...what would be the
end-of-the-year adjusting entries for the following transactions that
took place during the year?

1) Insurance paid June 1, 2002, for one year, $720, charged to
Insurance Expense when paid

2) The bill from the Twin Peaks Light and Power Company for December
has been received but not yet entered or paid, $465

Thanks!!!
 
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P

Paul A Thomas

DanaLove10 said:
Just need a little help on some homework...what would be the
end-of-the-year adjusting entries for the following transactions that
took place during the year?

1) Insurance paid June 1, 2002, for one year, $720, charged to
Insurance Expense when paid

2) The bill from the Twin Peaks Light and Power Company for December
has been received but not yet entered or paid, $465

If we just tell you, you'll not learn the why's behind the answer.

In the matching of revenues and expenses, part of that is to allocate the
revenues and expenses to the period in which they actually occur.

So, 12 months of insurance was paid (and booked)when only 7 months of
expense apply to that year. What do ~you~ think the adjusting entry should
be to make the expenses match the period. Think of adjusting an expense
account (that's to high) and an asset account for a prepaid expense.

And, the power bill needs to be booked. What accounts do ~you~ think
entries should be made to to record the expense and liability?

Post what you think the answer needs to be and then you'll get some good
pointers from us.
 

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