Final answer:
The balance in Ryan Company's prepaid insurance account after the adjusting entry on December 31, 2019, would be $4,200, indicating that one year's worth of the premium, or $1,400, has been expensed.
Step-by-step explanation:
The student asked what the balance would be in Ryan Company's prepaid insurance account after recording the adjusting entry for the insurance policy on December 31, 2019, assuming the policy was prepaid in the amount of $5,600 on January 1, 2019, for a four-year term. To calculate this, one divides the total premium paid by the number of years to find the annual expense. Then subtract the annual expense from the total prepaid amount to get the remaining balance.
Ryan Company's annual insurance expense is $5,600 divided by 4, which equals $1,400 per year. After one year, on December 31, 2019, they would have used up one year of the insurance, thus the adjusting entry would reduce the prepaid insurance account by $1,400. Therefore, the remaining balance in the prepaid insurance account would be $5,600 minus $1,400, which equals $4,200.