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On January 1 a company purchased a five-year insurance policy for $2,300 with coverage starting immediately. If the purchase was recorded in the expense account,
On January 1 a company purchased a five-year insurance policy for $2,300 with coverage starting immediately. If the purchase was recorded in the expense account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: Debit Insurance Expense, $460; credit Prepayments, $460. Debit Prepayments, $1,840; credit Insurance Expense, $1,840. Debit Prepayments, $2,300, credit Cash, $2,300. Debit Prepayments, $460; credit Insurance Expense, $460. Debit Insurance Expense, $1,840; credit Prepayments, $1,840
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