Snowden Company purchased a 2-year insurance policy on March 31, 2018 for $16,000 and charged the entire amount to Insurance Expense. The adjusting entry on December 31, 2018 will include ________.

Question

Quizplus · Accepted Answer

The insurance policy covers 24 months, so the monthly expense is $16,000 / 24 = $666.67. By December 31, 2018, 9 months have passed, so the expense should be $6,000. The remaining $10,000 should be credited back to Insurance Expense to adjust for the prepaid portion.

Snowden Company Purchased a 2-Year Insurance Policy on March 31