Final answer:
The adjusting entry at December 31 would be to record the insurance expense incurred during December. To calculate the amount, divide the total premium by the total number of days in the policy period to get the expense per day, then multiply it by the remaining days in December.
Step-by-step explanation:
The adjusting entry at December 31 for the insurance policy bought on December 6 would be to record the amount of insurance expense that has been incurred during the month of December. Since the policy is for three years and was purchased on December 6, there are 25 days remaining in December from the date of purchase. To compute the amount of the entry, we need to calculate the insurance expense per day and multiply it by the remaining days in December.
To calculate the insurance expense per day, we divide the total premium paid ($3,600) by the total number of days in the policy period (3 years x 365 days/year). This gives us the insurance expense per day ($3,600 / 1,095 days = $3.29 per day).
Now, we multiply the insurance expense per day ($3.29) by the remaining days in December (25 days) to find the amount of the adjusting entry for December ($3.29 x 25 days = $82.25).