Question

A company must make adjusting entry on December 31, 2019

Expired insurance, $7,000; on December 1, 2019, the firm paid $42,000 for six months’ insurance coverage in advance and debited Prepaid Insurance for this amount.

How do you post it in the General Journal and the Ledger.

Answer 1

Solution:

Journal Entries
Date	Particulars	Debit	Credit
1-Dec-19	Prepaid insurance Dr	$42,000.00
	To Cash		$42,000.00
	(To record insurance payment)
31-Dec-19	Insurance expense Dr	$7,000.00
	To Prepaid Insurance		$7,000.00
	(To record insurance expense)

Prepaid insurance
Date	Debit	Date	Credit
1-Dec-19	$42,000.00	31-Dec-19	$7,000.00
End Bal.	$35,000.00

Insurance Expense
Date	Debit	Date	Credit
31-Dec-19	$7,000.00