EX 3-6 Adjusting entries for prepaid insurance

The balance in the prepaid insurance account, before adjustment at the end of the year, is
$14,800. Journalize the adjusting entry required under each of the following alternatives for
determining the amount of the adjustment: (a) the amount of insurance expired during the
year is $11,200; (b) the amount of unexpired insurance applicable to future periods is $3,600.

Answer:
a. Insurance Expense........................................................ 11,200
                  Prepaid Insurance .................................................... 11,200
                            Insurance expired.

b. Insurance Expense........................................................ 11,200
                   Prepaid Insurance .................................................... 11,200
                            Insurance expired ($14,800 – $3,600).