Can someone help me prepare an adjusting entry for the following>
Prepaid insurance account had 4,000 balance on December 31, 2007. An analysis of insurance policies shows that 1,200 of unexpired insurance benefits remain at December 31, 2008.
Prepaid insurance is an asset.
The adjusting entry should be
Dr Insurance expense for amount of expense
Cr Prepaid insurance for amount of expense
The original asset value was 4000 and 1200 remains, so 2800 is the amount being expensed for the period.
the building has an estimated life of 20 years
To depreciate the building over its estimated life of 20 years, you will need to use the straight-line depreciation method. This method assumes that the asset depreciates equally over its useful life.
To calculate the annual depreciation expense, you will divide the cost of the building by the estimated life. However, the cost of the building is not provided in your question.
Once you have the cost of the building, you can calculate the annual depreciation expense by dividing the cost by 20 years.
The adjusting entry for depreciation would be:
Dr Depreciation expense - Building for the amount of annual depreciation expense
Cr Accumulated depreciation - Building for the same amount
By recording this adjusting entry, you are reflecting the estimated depreciation for the year and reducing the carrying amount of the building by the same amount. Over time, the accumulated depreciation will accumulate, and the carrying amount of the building will decrease accordingly.