On July 31,2018,a company purchased a two-year insurance policy for $27,000,paying cash and debiting Prepaid Insurance for the entire two-year premium amount.The adjusting entry on December 31,2018 includes a:

Question

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Five of the 24 months of insurance coverage has expired (or been used).The adjusting entry will include a debit to Insurance Expense and a credit to Prepaid Insurance for $5,625 (or $27,000 × 5/24).

On July 31,2018,a Company Purchased a Two-Year Insurance Policy for $27,000,paying