5. allied, inc. bought a two - year insurance policy on august 1 for $3,600. whats the adjusting journal…

Explanation:

Step1: Calculate monthly insurance expense

The insurance policy is for 2 - year (24 months) and costs $3,600. So the monthly insurance expense is $\frac{3600}{24}= 150$.

Step2: Calculate insurance expense from August 1 to December 31

From August 1 to December 31, there are 5 months. So the insurance expense for this period is $150\times5 = 750$.

Step3: Determine the adjusting journal entry

The prepaid insurance account needs to be decreased (credited) and the insurance expense account needs to be increased (debited). The adjusting journal entry is: Debit Insurance Expense $750$ Credit Prepaid Insurance $750$

Answer:

Debit Insurance Expense $750$; Credit Prepaid Insurance $750$