Question

Bristol, INC. paid $800 for a 4-month insurance policy on August 1 of the current year. On August 31, Bristol, Inc. made an adjusting entry to account for the insurance that expired during the month of August. The adjusting entry contained a debit to Insurance Expense in the amount of ___ and a credit to Prepaid Insurance in the amount of ___. The remaining balance in the Prepaid Insurance account after the adjustment was ___?

Answer 1

Answer:

200 ; 200 ; 600

Explanation:

Given that

Four month insurance policy amounted to $800

So for one month, it is

= Four month insurance policy  ÷ number of months

= $800 ÷ 4

= $200

So, the journal entry is

Insurance expense A/c Dr $200

       To Prepaid insurance A/c $200

(Being the insurance expense is recorded)

And, the remaining balance in the prepaid insurance account is

= $800 - $200

= $600