Answer:
Debit Insurance expense for $3,000
Credit Prepaid insurance for $3,000
Step-by-step explanation:
Before the recording entry, the monthly insurance expense has to be calculated first as follows:
Monthly insurance expense = Prepaid insurance / n ............. (1)
Where;
Prepaid insurance = Insurance policy amount = $36,000
n = number of months = 12
Substituting the values into equation (1), we have:
Monthly insurance expense = $36,000 / 12 = $3,000
Since the monthly insurance expense is $3,000, it implies that the insurance expense for March is $3,000.
the entry to record the monthly insurance expense in March will therefore look as follows:
Month Account Title DR ($) CR ($)
March Insurance expense 3,000
Prepaid insurance 3,000
(To record monthly insurance expense for March)
