Braun Corp. purchased a service vehicle liability policy in July, 2021 and paid a
fiveminusβyear
premium for
$ 450 comma 000$450,000.
It was recorded as Insurance Expense. The error was discovered late in 2021 when the accountants were reconciling 2021 for adjusting entries. What is the proper entry to correct the errors in 2021 if the tax rate for all years is
4040%?
Question content area bottom
Part 1
A.
No entry needed because it will
selfminusβcorrect
in two more years.
B.
Prepaid Insurance (End 2021)
βββββββββ 405 comma 000405,000
βββββββββInsurance Expense
βββββββββββ
ββββββββββ 405 comma 000405,000
ββββββββ
C.
Prepaid Insurance
ββββββββ 315 comma 000315,000
Prepaid Income Taxes
βββββββββββ 126 comma 000126,000
βββββββββββ
ββββββββββRetained Earnings
441 comma 000441,000
D.
Prepaid Insurance (End 2021)
225 comma 000225,000
ββββββββIncome Taxes Payable
90 comma 00090,000
ββββββββRetained Earnings
135 comma 000135,000