Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?
A) debit Insurance Expense, $3,000; credit Prepaid Insurance, $3,000
B) debit Insurance Expense, $14,000; credit Prepaid Insurance, $14,000
C) debit Prepaid Insurance, $11,000; credit Insurance Expense, $11,000
D) debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

Question

Quizplus · Accepted Answer

The adjusting entry for prepaid insurance is to debit Insurance Expense and credit Prepaid Insurance for the amount of insurance that has been used up or expired during the period. In this case, the unexpired insurance is $3,000, so the amount of insurance that has been used up or expired is $14,000 - $3,000 = $11,000. Therefore, the proper adjusting entry is to debit Insurance Expense for $11,000 and credit Prepaid Insurance for $11,000. Choice D is the correct answer.

Which of the Following Is the Proper Adjusting Entry, Based