On January 1, 2010, Dimes and Quarters Corp

question 118

Essay

On January 1, 2010, Dimes and Quarters Corp. purchased a general liability insurance policy for $3,600 to provide coverage for the calendar year.
1. If the company recorded the policy as an asset when purchased, what is the monthly adjusting journal entry that should be recorded at January 31, 2010?
*2. If the company expensed the cost of the policy on January 1, 2010, what is the monthly adjusting entry that should be recorded at January 31, 2010?

---

Definitions:

Book Value

The net value of an asset or liability recorded on the balance sheet, often different than its fair market value.

Building Account

An account used to track the costs associated with the construction or improvement of a building until the project is completed and the asset is ready for use.

Adjusted Trial Balances

An internal document that lists all accounts and their balances after adjustments are made for errors, accruals, and deferrals, used for preparing financial statements.

Adjusting Entries

Financial records made upon the completion of an accounting cycle to allocate gains and deductions to the actual period in which they occurred.