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A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.)

Respuesta :

Answer:

Credit to Prepaid insurance for $400 and Debit to Insurance expense for $400

Explanation:

The journal entry is given below:

Insurance expense ($4800 × 1 ÷ 12) $400  

       Prepaid Insurance  $400

(To record insurance expense)

Here the insurance expense is debited as it increased the expense and credited the prepaid insurance as it decreased the assets

Prepaid insurance credit for $400 and Insurance expense debit for $400.

Given that,

  • Insurance policy expense is $4,800.
  • Insurance policy period is of 12 months.

Working note,

Amount of insurance expense for 1 month = [$4,800 [tex]\times[/tex] (1 ÷ 12) ]

= $400

So, journal entry for the data are as follows,

Insurance expense A/c Dr. $400  

     To, Prepaid Insurance A/c  $400

    (Being insurance expense is recorded)

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