A company shows an $800 balance in Prepaid Insurance in the Unadjusted TrialBalance columns of the work sheet. The Adjustments columns show expired insurance of $600. This adjusting entry results in:
A)$400 in the Income Statement Debit column on the work sheet.
B)$600 more profit.
C)$600 less profit.
D)$400 in the Balance Sheet Credit column on the work sheet.
E)$200 difference between the debit and credit columns of the unadjusted trial balance.

Question

Quizplus · Accepted Answer

The adjusting entry for expired insurance will decrease the Prepaid Insurance account balance by $600, resulting in a new balance of $200 ($800 - $600). This will decrease expenses by $600 on the Income Statement, resulting in a $600 increase in profit. Therefore, the correct answer is C, as there will be $600 less profit than originally shown in the Unadjusted Trial Balance.

A Company Shows an $800 Balance in Prepaid Insurance in the Unadjusted