Answer:
a. The adjusting entry:
Debit Insurance expense $20,250
Credit Prepaid insurance $20,250
b. The adjusting entry:
Debit Insurance expense $20,250
Credit Prepaid insurance $20,250
Explanation:
Before adjustment at the end of the year, the balance in the prepaid insurance account is $27,000
a. The amount of insurance expired during the year is $20,250. The adjusting entry:
Debit Insurance expense $20,250
Credit Prepaid insurance $20,250
b. The amount of unexpired insurance applicable to future periods is $6,750. The amount of insurance expired during the year = $27,000 - $6,750 = $20,250
The adjusting entry:
Debit Insurance expense $20,250
Credit Prepaid insurance $20,250
