10/1/2005 · However, $5,000 of premiums were paid for life insurance policies covering Y’s officers, for which Y is the beneficiary. Thus, $5,000 must be added back to book income on Schedule M-1. Conclusion Although these are just a few of the many Schedule M-1 adjustments , they should illustrate the underlying concept.
Prepaid Expense Beginning $0 Prepaid Expense Ending $12,000. Out of the $12,000 balance there was $3,000 for a 5 year prepaid expense. Per the 12 month rule, I only took a M-1 adjustment for $600 the first year and excluded the rest of $2,400. So here’s the calculation for my M-1 adjustment :, On December 31, an adjusting entry will debit Insurance Expense for $400 (the amount that expired: 1/6 of $2,400) and will credit Prepaid Insurance for $400. This means that the debit balance in Prepaid Insurance at December 31 will be $2,000 (5/6 of the $2,400 cost), since this is the amount that has not yet expired. At the end of each month, an adjusting entry of $400 will be recorded to debit Insurance.
What is prepaid insurance? | AccountingCoach, Adjusting Entry for Prepaid Expense – AccountingVerse, Adjusting Entry for Prepaid Expense – AccountingVerse, Common Schedule M-1 adjustments. – Free Online Library
