Adjusting Entries for Prepaid Insurance
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An examination of the Prepaid Insurance account shows a balance of $4,000 at the end of an accounting period, before adjustment. Prepare entries in journal form to record the insurance expense for the period under the following independent assumptions:
1. An examination of the insurance policies shows that insurance that cost $2,000 at the end of the period.
2. An examination of the insurance policies shows that insurance that cost $700 has expired during the period.
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The solution explains the adjusting entries for Prepaid Insurance.
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When an insurance policy is purchased, the money is paid in advance and so the debit is shpwn in the prepaid insurance account. As each month passes, insurance for that month expires and ...
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