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Gizmo Inc. purchased a one-year insurance policy on October 1 for $5,280. The adjusting entry on December 31 would be: (If an amount box does not require an entry, leave it blank.)

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Answer and Explanation:

The adjusting entry is shown below:

Insurance Expense ($5,280 × 3 months ÷ 12 months) $1,320

           To Prepaid Insurance $1,320

(being the insurance expense is recorded)

Here the insurance expense is debited as it increased the expense and credited the prepaid insurance as it decreased the assets

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