a. Insurance of $18,000 paid for the current year was recorded as a debit to Insurance Expense and a credit to Prepaid Insurance.
b. A withdrawal of $10,000 by Brian Phillips, owner of the business, was recorded as a debit to Wages Expense and a credit to Cash.
Journalize the entries to correct the errors. Omit explanations.
Answer:
a. The correction could be made with one or two entries as shown below.
Prepaid Insurance36,000
Insurance Expense18,000
Cash18,000
or (reverses original entry)
Prepaid Insurance18,000
Insurance Expense18,000
Prepaid Insurance18,000
Cash18,000
b. Brian Phillips, Drawing10,000
Wages Expense10,000