Answer:
December 31
Insurance expense 2450 Dr
Prepaid Insurance 2450 Cr
Explanation:
Under the accrual or matching principle, we are required to match the revenues with expenses and record them in the period to which they relate to. Thus the prepaid insurance that relates to the period ending December 31 and has been consumer should be recorded as insurance expense in that period. So, we make the above adjusting entry.
The insurance expense for 2 months is = 4900 * 2/4 = 2450
So, we record 2450 as insurance expense for the year at 31 December and reduce the account of prepaid insurance by this amount
