On October 1,2019,Adams Company paid $4,800 for a two-year insurance policy with the insurance coverage beginning on that date.As of December 31,2019,which of the following account balances are correct after adjusting entries have been made?

Question

Quizplus · Accepted Answer

The insurance policy covers two years for a total cost of $4,800. From October 1, 2019, to December 31, 2019, is three months. The monthly cost is $4,800 / 24 months = $200. For three months, the expense is 3 * $200 = $600. Therefore, $600 is expensed, and the remaining $4,200 ($4,800 - $600) is still prepaid.

On October 1,2019,Adams Company Paid $4,800 for a Two-Year Insurance