On June,30,2013,a company purchased a two-year insurance policy for $18,000,paying cash and debiting Prepaid Insurance for the entire two-year premium amount.The adjusting entry on December 31,2013 includes a

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The insurance policy covers two years, so the monthly expense is $750 ($18,000/24 months). By December 31, 2013, six months have passed, so the expense is $4,500 (6 months x $750). The adjusting entry should credit Prepaid Insurance by $4,500 to reflect the expense incurred.

On June,30,2013,a Company Purchased a Two-Year Insurance Policy for $18,000,paying