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:

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Since the payment was made for six months in advance, only three months would have elapsed by December 31. Therefore, the amount that would have been used up by December 31 is $3,000 (half of the amount paid). The remaining $6,000 represents the amount of prepaid insurance expense that hasn't been used up yet, and it would be included in the Prepaid Insurance account on the adjusted trial balance.

On November 1, Phillips Tool and Die Company Paid Six