An auditor discovered an error while conducting Black Inc.'s 2016 audit. No errors were corrected during 2015.

A 2 year insurance policy was purchased on April 30, 2015. This policy resulted in $24,000 being debited to Prepaid Insurance [On April 30, 2015]. However, no adjustmnet was made on December 31, 2015 or on December 31, 2016.

Required:

Prepare the appropriate journal entries. Assume the 2016 books have not been closed but the tax entries have been completed. The tax rate for all years is 40%. Apply US GAAP.

Make sure to record the appropriate entries regarding taxes.