Answer:
February 1
Dr. Prepaid Insurance $674,400
Cr. Cash $674,400
June 30
Dr. Insurance Expense $140,500
Cr. Prepaid Insurance $140,500
Explanation:
Prepaid Expenses are those expense which have not been accrued yet but the payment against the future expense is made in advance.
On February 1 all the insurance is paid in advance so, it will be recorded in the prepaid insurance account.
On June 30 only 5 months are accrued in respect of Prepaid Insurance, So, the Insurance Expense of 5 months should be recorded and transferred from the prepaid insurance account.
Accrued Insurance Expense = $674,400 x 5/24 = $140,500
