What is adjusting entry?

What adjusting entry is required at Dec. 31 assuming the unadjusted balance in Prepaid Ins is $2604?

  • ABC Company's year end is Dec. 31. Mr. ABC purchased a one-year insurance policy on Oct. 1 for $2604 and recorded it in Prepaid Insurance. What adjusting entry is required at Dec. 31 assuming the unadjusted balance in Prepaid Insurance is $2604?

  • Answer:

    Oct, Nov, Dec = 3 months expired 2604 / 12 = 217 per month * 3 months = $651 Insurance Expense 651 ------>Prepaid Insurance 651

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