Prepaid Expense: Adjusting Entry
Response to the following :
Refer to problem.
(1) Make the adjusting entry necessary on the company's books on December 31 with respect to this insurance policy and
2) Compute the ending balance in the prepaid insurance account; assume that the balance as of the beginning of the year was $0.
Problem:
Prepaid Expense:
Original Entry On August 1, the company paid $72,000 cash for a four-year insurance policy. The 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.