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10 June, 11:46

Wilson company paid 6,700 for a 4-month insurance premium in advance on November 1, with coverage beginning on that date. The balance in the prepaid insurance account before adjustment at the end of the year is 6,700, and no adjustments had been made previously. The adjusting entry required on December 31 is:

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  1. 10 June, 12:13
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    Given that,

    Total prepaid insurance = $6,700

    Monthly insurance:

    = Total prepaid insurance : 4 months

    = $6,700 : 4 months

    = $1,675

    Insurance expense for two months:

    = $6,700 - $1,675

    = $5,025

    Therefore, the adjusting entry required on December 31 is as follows:

    Insurance expense A/c Dr. $5,025

    To Prepaid insurance $5,025

    (To record the adjusting entry for the insurance)
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