Answer:
The Prepaid Insurance account will have a debit balance of $2,700
Explanation:
The computation of the balance of prepaid insurance is shown below:
On October 1, 2014, its balance is $3,600
And we have to compute till January 1, 2015
So, if we calculate from October 1, 2014, to January 1, 2015, then it has 3 months
So, 3-month balance equals to
= Amount × (number of months calculated ÷ total number of months in a year)
= $3,600 × (3 months ÷ 12 months)
= $900
So, the balance would be
= Amount - adjustments made
= $3,600 - $900
= $2,700
