The amount in prepaid insurance represents the remainder of a 3-year plicy purchsed july1, 2006


In the unadjusted trial balance December 31, 2008 the amount is 30,600 for prepaid insurance.

My question is what journal entry would you do here?

YOu need to calculate how much of the Prepaid insurance has been used.

Take the cost / 3 yrs to get the yearly cost then take that amount * number of months used in the year / 12 months in the year.

Then you need to do an adjusting entry to record that amount of insurance that was used during the period.

The journal entry is:
Debit Insurance Expense for the amount of insurance used during the period
Credit Prepaid Insurance for the same amount

Insurance premium paid on 1st July entry will be