Smokey Company purchases a one-year insurance policy on July 1 for $4,380. The adjusting entry on...

Smokey Company purchases a one-year insurance policy on July 1 for $4,380. The adjusting entry on December 31 is

a.debit Insurance Expense, $2,190; credit Prepaid Insurance, $2,190

b.debit Insurance Expense, $1,825; credit Prepaid Insurance, $1,825

c.debit Insurance Expense, $2,555; credit Prepaid Insurance, $2,555

d.debit Prepaid Insurance, $2,190; credit Cash, $2,190

Solutions

Expert Solution

Insurance expense from July to December (6 months)

= $4,380 X 6/12

= $2,190

Debit insurance expense and credit prepaid insurance with $2,190.

Option a.debit Insurance Expense, $2,190; credit Prepaid Insurance, $2,190

ekkarill92 answered 1 year ago

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