The prepaid insurance account had a balance of $5600 at the beginning of the year. The account was debited for $1800 for premiums on policies purchased during the year. Journalize the adjusting entry required at the end of the year for each situation.
(a) the amount of unexpired insurance applicable to future periods is $3680

(b) the amount of insurance expired during the year is $3720

Insurance 120
Prepaid insurance 120


Insurance exp 2040
Prepaid ins 2040

Quote:

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Originally Posted by notebook

(a) the amount of unexpired insurance applicable to future periods is $3680

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Prepaid Insurance, Jan 1, $5,600
Purchases, $1,800
Total = $7,400

Only $3,720 left.

Therefore, 7,400-3,720 = 3,680 used up

Dr. Insurance Expense 3,680
Cr. Prepaid Insurance 3,680

Quote:

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Originally Posted by notebook

(b) the amount of insurance expired during the year is $3720

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Dr. Insurance Expense 3,720
Cr. Prepaid Insurance 3,720