Question

The $9,600 balance in Fellows Company's prepaid insurance account represents six months of insurance. The insurance was purchased on December 1. Which of the following should be included in the adjusting journal entry on December 31?

a) Debit to Insurance Expense for $9,600
b) Debit to Insurance Expense for $1,600
c) Debit to Cash for $9,600
d) Debit to Prepaid Insurance for $1,600

Answer 1

b. Debit to Insurance Expense for $1,600.

Explanation:

$9,600 balance in Fellows Company's prepaid insurance account represents six months of insurance.

Monthly amount is =
`(9600)/(6)` = $1600

So, the following should be included in the adjusting journal entry on December 31.

b. Debit to Insurance Expense for $1,600.