1) Record payment of one-year insurance premium of 3,000 on March 1 by using the horizontal model or prepare down the journal entry.
2) Illustrate the amount of insurance premium “used” that month by using the horizontal model or prepare down the adjusting entry which will be made at the end of every month.
3) Compute the amount of prepaid insurance which must be reported on 31st of August balance sheet with respect to this policy.
4) If premium had been 6000 for the 2yr period, how must the prepaid amount at August 31 of the 1st year is reported on balance sheet?
5) describe why are prepaid expenses reflected as the asset instead of being recorded as the expense in the accounting period in which the item is paid?