Question

What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $9,050 before adjustment, and the unexpired amount per analysis of policies is $3,900?

Answer 1

Explanation:

The adjusting entry is as follows

On December 31

Insurance expense A/c Dr $5,150

               To Prepaid insurance A/c $5,150

(Being the insurance expense is recorded)

It is computed below:

= Balance in prepaid insurance account - unexpired amount

= $9,050 - $3,900

= $5,150

While passing the adjusting entry we debited the insurance expense account and credited the prepaid insurance account