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3 March, 02:03

On January 1, a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

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  1. 3 March, 02:11
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    Debit Insurance Expenses $360

    Credit Prepaid Insurance $360

    Explanation:

    Adjusting entries for the first year

    Debit Insurance Expenses $360

    Credit Prepaid Insurance $360

    Five-year insurance policy purchased for $1,800

    = $1,800:5

    = $360
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