The balance in the prepaid insurance account, before adjustment at the end of the year, is $21,700.

The balance in the prepaid insurance account, before adjustment at the end of the year, is $21,700. Journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment: (a) the amount of insurance expired during the year is $16,450; (b) the amount of unexpired insurance applicable to future periods is $5,250.

Answer:

a. Insurance Expense 16,450  Prepaid Insurance  16,450 Insurance expired.    b. Insurance Expense 16,450  Prepaid Insurance  16,450 Insurance expired ($21,700 – $5,250).