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13-07-2022
Business

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Harrod Company paid $5,300 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 $5,300, and no adjustments had been made previously. The adjusting entry required on December 31 is:

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tutorconsortium31 tutorconsortium31

21-07-2022

Debit Insurance Expense $2,650;

Credit Prepaid Insurance $1325

Explanation:

When the asset is charged to expense, the journal entry is to debit the insurance expense account and credit the prepaid insurance account.

Total Prepaid Insurance= $5,300 Monthly Insurance=Total Prepaid

Insurance / 4 = $1,325

Insurance expenses for 2 month (November and December)= $1,325 * 2 = $2650

There is no cash transaction in this adjusting entry

When insurance expenses increase= Debit

When decrease in prepaid expenses=

Credit

Debit Insurance Expense $2,650;

Credit Prepaid Insurance $1325

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