Question

At December 31, the unadjusted trial balance of H&R Tacks reports Prepaid Insurance of $9,120 and Insurance Expense of $0. The insurance was purchased on July 1 and provides coverage for 24 months. Required: 1. Prepare the adjusting journal entry on December 31, 2. Prepare the T-accounts for each account, enter the unadjusted balances, post the adjusting journal entry, and report the adjusted balance. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the adjusting journal entry on December 31. (If no entry is required for a transaction/event, select "No Journal Entry in the first account field.) View transaction list

Answer 1

In this case we would record insurance expense for 6 months from July 1 to Dec 31
Record adjusting journal entry on December 31
Date	General Journal	Debit	Credit
31-Dec	Insurance expense (9120*6/24)	$2,280
	Prepaid insurance		$2,280
	(To record insurance expense)
T-account prepaid insurance
Prepaid insurance
Beg. Bal	$0
01-July Cash	$9,120	31-Dec Insurance expense	$2,280
End bal.	$6,840
T-account insurance expense
Insurance expense
Beg. Bal	$0
01-July Prepaid insurance	$2,280
End bal.	$2,280