Determine the Account and Amount to Be Debited and the Account

question 10

Essay

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. On October 1, 2013, the firm paid a premium of $5,600 in cash for a 1-year insurance policy. On December 31, 2013, coverage for a period of three months had expired.

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Definitions:

Impairment Loss

A charge recorded when the carrying amount of an asset exceeds its recoverable amount.

Carrying Amounts

The value at which an asset is recognized on the balance sheet, after deducting accumulated depreciation or amortization.

Goodwill

An intangible asset that arises when a buyer acquires an existing business at a price higher than the fair market value of its net identifiable assets.

Fair Market Value

is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market.