Taylor Company has a December 31 year end. Adjusting journal entries are made at year end (rather than monthly). Taylor Co. purchased a $1,000,000 twelve month insurance policy on August 1, 2019. Coverage begins on August 1, 2019. The annual premium is $12,000. Taylor Co. paid $1,000 on August 1 and $11,000 on September 1. Prepare the journal entries on August 1, 2019, September 1, 2019, and December 31, 2019.

Debit credit

Aug 1 2019 prepaid insurance 1000

Cash 1000

Sep 1 2019 prepaid insurance 11000

Cash 11000

Dec 31 2019 insurance expense 5000

Prepaid insurance 5000

12000x 5/12

Refer to question 1. Assume that this insurance policy is the only insurance policy Taylor Co. has purchased. What is the balance in prepaid insurance following the August 1, September 1 and December 31 journal entries?