The prepaid insurance account had a balance of $12,000 at the beginning of the year

The prepaid insurance account had a balance of $12,000 at the beginning of the year. The account was debited for $18,000 for premiums on policies purchased during the year. Journalize the adjusting entry required at the end of the year for each of the following situations: (a) the amount of unexpired insurance applicable to future periods is $13,600; (b) the amount of insurance expired during the year is $16,400.

Answer:


a. Insurance Expense 16,400  Prepaid Insurance  16,400 Insurance expired ($12,000 + $18,000 – $13,600).    b. Insurance Expense 16,400  Prepaid Insurance  16,400 Insurance expired.