PE 3-3B Adjustment for prepaid expense

The prepaid insurance account had a beginning balance of $7,200 and was debited for
$4,800 of premiums paid during the year. Journalize the adjusting entry required at the
end of the year assuming the amount of unexpired insurance related to future periods
is $8,000.

Answer:
Insurance Expense........................................................ 4,000
                            Prepaid Insurance .................................................... 4,000
                                        Insurance expired ($7,200 + $4,800 – $8,000).