Question
In: Accounting
On April 1, 2014, the premium on a one-year insurance policy was purchased for $3,900 cash...
On April 1, 2014, the premium on a one-year insurance policy was purchased for $3,900 cash with the insurance coverage beginning on that date. The books are adjusted only at year-end. Which of the following correctly describes the effect on the financial statements of the December 31, 2014 adjusting entry?
(a) Insurance expense will increase $975.
(b) Insurance expense will increase $2,925.
(c) Prepaid insurance will decrease $975.
(d) Prepaid insurance will increase $2,925.
Solutions
Expert Solution
(b) Insurance expense will increase $2,925.
The effect on the financial statements of the December 31, 2014 adjusting entry would lead to increase in the Insurance expense by:
= $3,900 × 9/12
= $2,925
ekkarill92 answered 1 year agoRelated Solutions
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