Question

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. 14- Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below Click the answer you think is right.
a.Prepaid insurance would be credited for $3,600.
b.Cash would be credited for $3,600.
c.Insurance expense would be debited for $300.
d.Insurance expense would be debited for $3,600.

Answer 1

Answer:

c.Insurance expense would be debited for $300.

Explanation:

Provided that

12 month insurance policy purchased on Dec 1 = $3,600

So, the adjusting entry on Dec 31 would be

Insurance expense A/c Dr $300

          To Prepaid Insurance $300

(Being insurance expense is recorded)

The computation is

= $3,600 ÷ 12 months

= 300

As we have to compute for 1 month so we recorded $300 insurance expense

Answer 2

The adjusting entry would be that c.Insurance expense would be debited for $300.

As the insurance was purchased for the year, we can only charge the insurance expense for December to the Insurance expense account.

Insurance Amount for December

= Total amount x 1 / 12 months

= 3,600 x 1/12

= $300

This amount will be debited to the insurance expense account as expenses increase when debited.

In conclusion, option C is correct.

Find out more on prepaid insurance at https://brainly.com/question/25190564.