What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $15,500, and unexpired amounts per analysis of policies of $4,500?
A) Debit Insurance Expense, $4,500; Credit Prepaid Insurance, $4,500.
B) Debit Insurance Expense, $15,500; Credit Prepaid Insurance, $15,500.
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

To adjust the prepaid insurance account, the unexpired amounts per analysis of policies (in this case, $4,500) must be subtracted from the balance before adjustment ($15,500). The difference ($11,000) represents the amount of insurance expense that was incurred during the period but has not yet been recognized. Therefore, the proper adjusting entry is to debit Insurance Expense for $11,000 and credit Prepaid Insurance for $11,000.

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