Adjusting Entry Question - Prepaid insurance??

Question

The Prepaid insurance account shows the following entries on June 30:

Beginning Balance -
January 1 - $2,900
May 1 - $3,366

I do get the concept there are just too many dates and numbers . . I get confused !

Then it says -

The beginning balance represents the unexpired portion of a one-year policy purchased the previous year. THe january 1 entry represents a new one-year policy, and the May 1 entry represents the additional coverage of a three-year policy.

Yes, I need to make an adjusting entry using this information .. Thanks

Answer 1

Every month debit insurance expense 1/12 of 2,900 & credit pre paid ins. for the same amount (241.67).

Every month debit insurance expense 1/36 of 3,366 & credit pre paid ins. for the same amount (93.50).

The concept is that you're paying in advance for something that will be used up monthly. The unused portion presumably can be refunded, so it is still an asset. I think you can figure out the rest, so I won't explain it to you.

So, if these entries haven't been made, on June 30, you would debit insurance expense 1/2 of 2,900 (1,450) & credit pre paid ins. for the same amount.

for the other policy you have 2 months, which would be 187. If you have to do both policies in one entry on June 30, it would be as follows:
debit insurance expense 1,637
credit pre paid insurance 1,637