What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $18,500, and unexpired amounts per analysis of policies of $6,000?
A) Debit Insurance Expense, $6,000; Credit Prepaid Insurance, $6,000.
B) Debit Insurance Expense, $18,500; Credit Prepaid Insurance, $18,500.
C) Debit Prepaid Insurance, $12,500; Credit Insurance Expense, $12,500.
D) Debit Insurance Expense, $12,500; Credit Prepaid Insurance, $12,500.

Question

Quizplus · Accepted Answer

The adjusting entry for prepaid insurance at the end of the fiscal year is to recognize the portion of the prepaid amount that has expired during the period as an expense and reduce the amount of prepaid insurance by the same amount.

Therefore, the proper adjusting entry at June 30 is to debit Insurance Expense for the unexpired amount of $12,500 ($18,500 - $6,000) and credit Prepaid Insurance for the same amount. Hence, the correct answer is option D.

What Is the Proper Adjusting Entry at June 30, the End