The prepaid insurance account had a balance of $3,000 at the beginning of the year. the account was debited for $32,500 for premiums on policies purchased during the year. journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment: (a) the amount of unexpired insurance applicable to future periods is $4,800; (b) the amount of insurance expired during the year is $30,700

1.  Insurance expense A/c Dr $30,700

          To Prepaid insurance A/c $30,700

(Being the insurance expense is adjusted)

2. Insurance expense A/c Dr $30,700

          To Prepaid insurance A/c $30,700

(Being the insurance expense is expired)

Explanation:

The journal entries are shown below:

1. Insurance expense A/c Dr $30,700

          To Prepaid insurance A/c $30,700

(Being the insurance expense is adjusted)

The computation is shown below:

= Balance in  prepaid insurance account + premiums on policies purchased - unexpired insurance applicable

= $3,000 + $32,500 - $4,800

= $30,700

2. Insurance expense A/c Dr $30,700

          To Prepaid insurance A/c $30,700

(Being the insurance expense is expired)

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