At December 31, 2017, before any year-end adjustments, Doris Knitting Company's Insurance Expense account had a balance of $725 and its Prepaid Insurance account had a balance of $2,900. It was determined that $1,500 of the Prepaid Insurance had not expired. The adjusted balance for Insurance Expense for the year would be
A) $1,500.
B) $2,125.
C) $2,225.
D) $1,125.

Question

Quizplus · Accepted Answer

Since $1,500 of the Prepaid Insurance had not expired, this means that $2,900 - $1,500 = $1,400 had expired and should be recognized as an expense. Therefore, the adjusted balance for Insurance Expense would be $725 + $1,400 = $2,125.

At December 31, 2017, Before Any Year-End Adjustments, Doris Knitting