The Jacob Company Keeps Its Accounts on a Calendar-Year Basis

Short Answer

The Jacob Company keeps its accounts on a calendar-year basis. On January 1, 2019, there is a balance of $2,800 in the Prepaid insurance account. The insurance represented by that amount expires on March 31, 2019, but the business makes no entry to record the expiration of the insurance until its year-end. On April 1, 2019, the Company pays $16,000 for an insurance policy covering the period April 1, 2019 - March 31, 2020. Prepare the journal entry at December 31, 2019, to record the full amount of insurance expense for the year.