Module $2$ Problem Set

Adjustment for prepaid expense

The prepaid insurance account had a beginning balance of $$6,000$ and was debited for $$12,500$ of premiums paid during the year.

Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future periods is $$13,000.$ If an amount box does not require an entry, leave it blank.

Insurance Expense $$

$$

Prepaid Insurance $$

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Set up a Prepaid Insurance T$-$account. Recall that prepaid insurance expires and becomes an expense with the passage of time. The insurance expense is the amount needed to arrive at the given ending balance. Premiums paid are increases to the account. The unexpired amount is the ending balance to the account. Solve for the expense by keeping in mind that the beginning balance of prepaid insurance plus premiums paid minus the insurance expense $($expired$)$ equals the ending balance of prepaid insurance. Complete your adjusting entry by making sure that it affects at least one income statement account and one balance sheet account.