On March 31, 2010, the Trident Company purchased a two-year fire insurance policy.Tricot recorded the purchase by debiting Prepaid Insurance and crediting Cash for $12, 000.Which of the following adjusting entries should Trident prepare at the end of 2010?

Question

Quizplus · Accepted Answer

The total cost of the insurance policy is $12,000 for two years, which equals $6,000 per year. By the end of 2010, one year has passed, so $6,000 should be recognized as an expense. The correct entry decreases Prepaid Insurance and increases Insurance Expense by $6,000, which matches option B (though the amount should be $6,000, not $4,500, based on the correct calculation).

On March 31, 2010, the Trident Company Purchased a Two-Year Prepaid Insurance 4,500 Insurance Expense 4,500\begin{array}{ll}\text { Prepaid Insurance } & 4,500 \\\text { Insurance Expense } & 4,500\end{array} Prepaid Insurance Insurance Expense ​4,5004,500​

On March 31, 2010, the Trident Company Purchased a Two-Year $\begin{array}{ll}\text { Prepaid Insurance } & 4,500 \\\text { Insurance Expense } & 4,500\end{array}$