On October 1, Blues Company paid $12,000 for one year of insurance, in advance. Which of the following will be part of the adjusting entry on December 31?

Question

Quizplus · Accepted Answer

By December 31, three months of the insurance have been used, so the expense for these months should be recognized. $12,000 for one year means $1,000 per month. For three months, the expense is $3,000, so Insurance Expense is debited for $3,000.

On October 1, Blues Company Paid $12,000 for One Year