Kreative Kitchens purchased a 1-year Insurance policy on 1 March, 2020. The enti
Kreative Kitchens purchased a 1-year Insurance policy on 1 March, 2020. The entire premium of $9000 was recorded by debiting Prepaid Insurance. Ignore GST
Required
(a) Give the adjusting entry at 30 June for the year ending 30 June 2020.
(b) What amount should be reported in the 30 June 2020 statement of financial position for Prepaid Insurance?
(c) If no adjusting entry was made on 30 June, by how much would profit be overstated or understated?
Would assets be overstated or understated? Explain.
(d) What would your adjusting entry in requirement A be if the premium of $9000 was recorded by debiting Insurance expenses?
