Final answer:
The balance in Prepaid Insurance represents the expired insurance premiums after adjusting entries. Option a
Step-by-step explanation:
The balance in Prepaid Insurance represents the amount of insurance premium that has already been paid but has not yet been used. After adjusting entries, the balance in Prepaid Insurance will represent the expired insurance premiums. These are the insurance premiums that have been used up or expired during the accounting period.
For example, if a company pays an annual insurance premium of $1,200 on January 1 and records it as Prepaid Insurance, the balance in Prepaid Insurance will be $1,200. At the end of each month, an adjusting entry is made to recognize the portion of the insurance premium that has been used up.
If 2 months have passed, the adjusting entry would decrease the Prepaid Insurance account by $200, representing the expired insurance premiums for those 2 months.
Therefore, after adjusting entries, the balance in Prepaid Insurance represents expired insurance premiums, option a).