Refer to PE 4–10.

1. Make the adjusting entry necessary on the company’s books on December 31 with respect to this insurance policy

2. Compute the ending balance in the prepaid insurance account. Assume that the balance as of the beginning of the year was $0.

Data from PE 4-10

On August 1, the company paid $72,000 cash for a four-year insurance policy. Th e policy went into effect on August 1. Make the journal entry necessary on the company’s books to record the payment for the insurance on August 1.