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11 February, 11:00

Wilson company paid $4,800 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 $4,800 and no adjustments had been made previously. the adjusting entry required on december 31 is:

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  1. 11 February, 14:02
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    The adjusting entry required on December 31 is:

    Debit Insurance Expense = $2,400 and credit Prepaid Insurance = $2,400.

    this is how we calculate this;

    Amount paid = $4,800

    For months of insurance = 4

    from 1st November to 31st December 2 months passed, So;

    $4,800 x 2/4 = $4,800 / 2 = $2,400.
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