Question

If, on December 31, 2022, the insurance still unexpired amounted to $18, the adjusting entry would contain a:

a. debit to Insurance Expense for $57.
b. debit to Prepaid Insurance for $57.
c. debit to Prepaid Insurance for $18.
d. credit to Prepaid Insurance for $18.

Answer 1

The adjusting entry would contain a credit to Prepaid Insurance for $18.

Step-by-step explanation:

The adjusting entry would contain a credit to Prepaid Insurance for $18.

Since the insurance is still unexpired on December 31, 2022, it means that a portion of the prepaid insurance has not been used up yet. Therefore, the adjustment would involve decreasing the balance in the Prepaid Insurance account by the amount of insurance that has been used up, which is $18. This is a credit to Prepaid Insurance.

The correct answer is d. credit to Prepaid Insurance for $18.