What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $15,500, and unexpired amounts per analysis of policies, $4,500?

This subject is Accounting.

Assistance needed.

To determine the proper adjusting entry for the prepaid insurance account at June 30, you need to consider the prepaid insurance balance before adjustment and the unexpired amounts per analysis of policies.

1. Prepaid Insurance Balance Before Adjustment ($15,500): This amount represents the initial prepaid insurance expense recorded at the beginning of the fiscal year.

2. Unexpired Amounts per Analysis of Policies ($4,500): This amount indicates the portion of the prepaid insurance that corresponds to the remaining coverage period as of June 30.

To calculate the adjusting entry, you need to subtract the unexpired amount from the prepaid insurance balance before adjustment. Here is the breakdown of the adjusting entry:

Debit Prepaid Insurance: The unexpired amount per the policy analysis ($4,500) needs to be reduced from the Prepaid Insurance asset account. This decreases the balance of prepaid insurance, as the amount has expired or been used during the fiscal year.

Credit Insurance Expense: The unexpired amount per the analysis ($4,500) also needs to be recorded as an expense in the current fiscal year since it is no longer a prepaid expense. This recognizes the portion of insurance that has been used in the current period.

The adjusting entry would be as follows:

Debit Prepaid Insurance: $4,500
Credit Insurance Expense: $4,500

By making this adjusting entry, you accurately account for the portion of prepaid insurance that has been used during the fiscal year, ensuring that the financial statements reflect the appropriate expenses and asset balances.