Question

If the beginning balance in prepaid insurance was $500, and $4,500 was paid for an insurance premium during the year, what is the ending balance in the prepaid insurance account after the above adjusting entry?

Answer 1

$1,500

Step-by-step explanation:

The computation of the ending balance in the prepaid insurance is shown below:

= Beginning balance of prepaid insurance + premium paid - adjustment made

= $500 + $4,500 - $3,500

= $1,500

Basically we added the beginning balance, the premium paid and deduct the adjustment made so that the ending balance could come