QS 3-5 (Algo) Prepaid (deferred) expenses adjustments LO P1 For each separate case below, follow the three-step process for adjusting the prepaid asset account at December 31, Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2. Assume no other adjusting entries are made during the year. Answer is not complete. a. Prepaid Insurance. The Prepaid Insurance account has a $6,100 debit balance to start the year. A review of insurance policies shows that $1,600 of unexpired insurance remains at year-end. DR or Prepaid Insurance CR? Step 1: Determine what the current account balance equals. $ 5,900 Debit 5,900 4,550 Step 2: Determine what the current account balance should equal. $ 1,350 Debit 1,350 Step 3: Record the December 31 adjusting entry to get from step 1 to step 2. Adjusting Entry Debit Credit Insurance expense 4,250 Prepaid insurance 4,250 b. Prepaid Insurance. The Prepaid Insurance account has a $7,290 debit balance at the start of the year. A review of insurance policies shows $1,600 of Insurance has expired by year-end. DR or CR? Prepaid Insurance 6250 < Prev 9 of 19 www www. Next >