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 $7,750 before adjustment, and the unexpired amount per analysis of policies is, $3,250?

Answer 1

Debit Insurance Expense, $4,500 and credit Prepaid Insurance, $4,500.

Step-by-step explanation

Since, expenses are always debited and the unexpired amount of insurance will be remaining balance of $3,250 after the adjusting entry.

So, the amount that is being accounted for at the end of the period

= $7,750 - $3,250

= $4,500

Adjusting entry at December 31

debit credit

insurance expense $4,500

prepaid insurance $4,500