Assume Idaho Company recorded the following adjusting journal entry at year-end: If the beginning balance in prepaid insurance was $500, and $2,500 was paid for an insurance premium during the year, what is the ending balance in the prepaid insurance account after the above adjusting entry?

Question

Assume Idaho Company recorded the following adjusting journal entry at year-end:  If the beginning balance in prepaid insurance was $500, and $2,500 was paid for an insurance premium during the year, what is the ending balance in the prepaid insurance account after the above adjusting entry?

Quizplus · Accepted Answer

The adjusting entry decreases prepaid insurance by $1,500 ($3,000 prepaid insurance at the end of the year - $1,500 prepaid insurance at the beginning of the year). Therefore, the ending balance in prepaid insurance would be $1,000 ($500 beginning balance + $2,500 premium paid - $1,500 adjustment).

Assume Idaho Company Recorded the Following Adjusting Journal Entry at Year-End