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
