On November 1, Phillips Tool and Die Company paid six months' insurance in advance totaling $9,000. An adjusted trial balance prepared on December 31 would include a balance in the Prepaid Insurance account of:

Question

Quizplus · Accepted Answer

Since the insurance was paid for six months in advance, and the adjustment period only covers two out of the six months, only 2/6 or 1/3 of the prepaid insurance has been used up. Therefore, the balance in the Prepaid Insurance account on December 31 would be $9,000 x 1/3 = $6,000.

On November 1, Phillips Tool and Die Company Paid Six