A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the

Question

astra-53 [7]

3 years ago

9

A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the

payment. The required adjusting journal entry on December 31 includes a:________

Business

1 answer:

Evgesh-ka [11] · Answer 1 · 2022-06-01T20:13:45+03:00

Answer:

The required adjusting journal entry on December 31 includes a:

Debit Insurance Expense $400

Credits Prepaid Insurance $400

Explanation:

On Dec. 1, a 12-month insurance policy was purchased and paid in advance for $4,800. The company records the insurance as the prepaid Insurance:

Debit Prepaid Insurance $4,800

Credit Cash $4,800

On December 31, the last day of the following 1 months, the company records an adjusting entry that Credits Prepaid Insurance for $400 ($4,800 divided by 12 months times the 1 months that will be prepaid as of December 31) and Debits Insurance Expense for $400

Debit Insurance Expense $400

Credits Prepaid Insurance $400