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A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a:_________
a. credit to Prepaid insurance for $400.
b. debit to Insurance expense for $400.
c. credit to Insurance expense for $400.
d. debit to Prepaid insurance for $400.
e. debit to Insurance expense for $4,800.

Respuesta :

Answer: a. credit to Prepaid insurance for $400.

b. debit to Insurance expense for $400

Explanation:

The required adjusting journal entry on December 31 will be:

Debit Insurance expense = ($4800 *1/12) = $400

Credit Prepaid Insurance = $400

(To record insurance expired for 1 month for December)

Therefore, the correct options are A and B.