ExpertACCA · Question 52 · Recording Transactions: Accruals and Prepayments
Section B - Case 2: Single Entity Accounts
Scenario: AquaHarvest Marine Farms
AquaHarvest prepares its financial statements for the year ended 30 September 20X6. The draft profit before adjustments is $120,000.
Issue 1: A payment for marine insurance of $6,000 for the year ending 31 December 20X6 was recorded entirely as an expense in the P&L.
Issue 2: Depreciation on harvesting equipment (Cost $80,000, Acc Dep $30,000) needs to be charged at 20% reducing balance.
Issue 3: A customer went bankrupt owing $2,500. This needs to be written off.
Issue 4: A suspense account has a $4,500 Credit balance because a cash receipt of $4,500 from a credit customer was only recorded in the cash book.
What is the correct journal entry to record the insurance prepayment?
Section B - Case 2: Single Entity Accounts
Scenario: AquaHarvest Marine Farms
AquaHarvest prepares its financial statements for the year ended 30 September 20X6. The draft profit before adjustments is $120,000.
Issue 1: A payment for marine insurance of $6,000 for the year ending 31 December 20X6 was recorded entirely as an expense in the P&L.
Issue 2: Depreciation on harvesting equipment (Cost $80,000, Acc Dep $30,000) needs to be charged at 20% reducing balance.
Issue 3: A customer went bankrupt owing $2,500. This needs to be written off.
Issue 4: A suspense account has a $4,500 Credit balance because a cash receipt of $4,500 from a credit customer was only recorded in the cash book.
What is the correct journal entry to record the insurance prepayment?
Answer options:
Debit Insurance Expense $1,500, Credit Prepayments $1,500
Debit Prepayments $1,500, Credit Insurance Expense $1,500
Debit Prepayments $4,500, Credit Insurance Expense $4,500
Debit Insurance Expense $4,500, Credit Bank $4,500
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