On October 1,2010,Adams Company paid $4,000 for a two-year insurance policy with the insurance coverage beginning on that date.As of December 31,2010,which of the following account balances are correct after adjusting entries have been made?

Question

Quizplus · Accepted Answer

$4,000/24 = $166.67 per month. Three months have been used (Oct, Nov, and Dec) so $166.67 * 3 = $500. This needs to be recorded as the expense and the balance in prepaid insurance is $4,000 - $500 = $3,500.

On October 1,2010,Adams Company Paid $4,000 for a Two-Year Insurance