Doug paid $1,200 on a one-year insurance policy on March 1.The entry included a debit to Prepaid Insurance.The adjusting entry on December 31 would include a:

Question

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At the end of the year, a portion of the insurance policy will have expired (11 months). Therefore, the Prepaid Insurance account needs to be reduced and the corresponding expense needs to be recognized. This is achieved with a debit to Insurance Expense for $1,000 and a credit to Prepaid Insurance for $1,000.

Doug Paid $1,200 on a One-Year Insurance Policy on March