JournaldrillPrepaid insurance used
A journal entry exercise from Journaldrill. Solve it with an account picker and debit and credit fields in your browser, and it is checked the moment you submit.
The task
On August 1, Oak Hill Auto Repair paid $3,600 for a 12-month insurance policy and debited Prepaid Insurance. Record the adjusting entry needed on December 31, the end of its accounting year.
What this exercise teaches
The policy costs $300 per month ($3,600 / 12), and five months (August through December) have expired, so $1,500 of coverage is used up. That amount moves from the Prepaid Insurance asset to Insurance Expense. Cash is not involved because the policy was paid in August.
A hint if you get stuck
Work out how many months of coverage have passed by year end and move that portion out of the asset.
This exercise is part of Pro
Pro unlocks all 54 exercises, with worked solutions and progress saved to your account. The free exercises work without an account.
You create a free account first, so Pro is attached to it.
Monthly is charged today and then every month until you cancel, in one click from your account page. Lifetime is one payment with no renewals. Full refund within 14 days of paying.