The prepaid insurance account had a beginning balance of $4,500 and was debited for $16,600 of premiums paid during the year. Journalize the adjusting entry (include an explanation) required at the end of the year, assuming the amount of unexpired insurance related to future periods is $5,600.
Answer:
Insurance Expense 15,500
Prepaid Insurance 15,500
Insurance expired ($4,500 + $16,600 – $5,600).