Is the end of march 20x1 at the beginning of january 20x1...

is the end of March 20x1. At the beginning of January 20x1 your company entered and paid a bill from Business Insurance Associates for the annual insurance premium. A copy of the bill is below along with the asset section of the balance sheet as of March 31, 20x1 and a section of the Profit and Loss report for three months ending March 31, 20x1. Your staff accountant let you know all month end journals have been booked. You are concerned about insurance expense for the month of March. What is wrong on March 31, 20x1 and how should it be corrected?

Transcript

00:01 A business pays weekly salaries of $22 ,000 on a friday for a five -day week ending on that day.

00:08 Journalize the necessary adjusting entry at the end of the fiscal period, assuming that one, the period ends on a tuesday or two on a wednesday.

00:18 First, let's figure out how much they would earn in one day.

00:23 If 22 ,000 is for five days, then we can divide 22 ,000 by five to find $2 ,000.

00:31 That the amount that employees would earn in just one day is $4 ,400.

00:39 So for tuesday, two days would have been earned, amounting to $8 ,800.

00:48 For wednesday, three days would have been earned, amounting to $1 ,320.

00:55 The employees have earned these amounts, even though they haven't been paid out.

01:00 The journal entry for both of these is a debit to salaries, expense, and a credit to salaries payable.

01:10 We don't credit cash here because we haven't paid them yet.

01:14 We owe them.

01:15 And remember that you increase your liabilities with a credit showing we owe more.

01:22 For wednesday, it would be the same exact entry, but for the amount of this new tab.

01:30 Three days were earned instead of just two.

01:37 And that's it.

01:38 Let's look at another one.

01:40 The balance in the prepaid insurance account before adjustment at the end of the period is 18 ,000.

01:46 Journalize the adjusting entry required under the following alternatives.

01:51 One, the amount of insurance expired during the year is 5 ,300, or two, the amount of unexpired insurance applicable to the future period is 2 ,700.

02:02 For both of these cases, you need to figure out how much was used of the insurance account or how much expired, because, that is the part that would need to be adjusted for in the adjusting journal entry.

02:14 So number one tells us the amount expired or used, 5300.

02:19 Number two, doesn't...

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