Husker Du Supplies Inc. purchased a 12-month insurance policy on March 1, 2015 for $1,800. At March 31, 2015, the adjusting journal entry to record expiration of this asset will include a

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Since the policy was purchased on March 1st and the adjusting entry is made on March 31st, only one month worth of the insurance (1/12 of the total) has been used up. Therefore, the Prepaid Insurance account must be reduced by $150 (1/12 of $1,800) to reflect the amount of insurance that has been used up during that month. The Insurance Expense account must be increased by the same amount to recognize the cost of one month's worth of insurance. Therefore, the adjusting entry will be a debit to Insurance Expense and a credit to Prepaid Insurance, both in the amount of $150.