A company shows an $800 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $600. This adjusting entry results in
A) $600 less profit
B) $600 more profit
C) $200 difference between the debit and credit columns of the unadjusted trial balance
D) $400 in the Income Statement Debit column on the work sheet
E) $400 in the Balance Sheet Credit column on the work sheet

Question

Quizplus · Accepted Answer

The adjusting entry for expired insurance will decrease the balance in Prepaid Insurance by $600, resulting in a new balance of $200 ($800 - $600). This decrease in assets (Prepaid Insurance) will result in a decrease in profit by the same amount, $600. Therefore, the correct answer is A, $600 less profit.

A Company Shows an $800 Balance in Prepaid Insurance in the Unadjusted