What is the proper adjusting entry at April 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $16,000, and unexpired amounts per analysis of policies, $6,000?
A) debit Insurance Expense, $6,000; credit Prepaid Insurance, $6,000
B) debit Insurance Expense, $16,000; credit Prepaid Insurance, $16,000
C) debit Prepaid Insurance, $10,000; credit Insurance Expense, $10,000
D) debit Insurance Expense, $10,000; credit Prepaid Insurance, $10,000

Question

Quizplus · Accepted Answer

The adjusting entry for prepaid insurance involves debiting Insurance Expense and crediting Prepaid Insurance. The difference between the balance of prepaid insurance and unexpired amounts per analysis of policies is $10,000 ($16,000 - $6,000), so the amount of the adjusting entry would be $10,000. Therefore, the correct option is to debit Insurance Expense, $10,000 and credit Prepaid Insurance, $10,000, which is choice D.

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