Question

On April 1, 2009, the company paid an insurance company $5,000 for a two-year fire insurance policy. The entire $5,000 was debited to insurance expense.

What is the Dec. 31, 2009 adusting journal entry?

Prepaid Insurance xx
Insurance expense xx

I can't figure out the values for this journal entry. I tried 5,000/24 * 9 = 1875 but that's wrong. Can you help me?

Answer 1

Just take the $5,000 and multiply it by the remaining months.

April-December is 9 months so subtract that from 24 to get 15.

(5,000*15/24) which should equal 3,125.