A review of the ledger of Khan Company at December 31, 2006, produces the following data pertaining to the preparation of annual adjusting entries.
1. Prepaid Insurance $ 9,800. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2005, for $ 6,000. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2006, for $ 4,640. This policy has a term of 2 years.