A four-year insurance policy in the amount of $20,000 was purchased two years ago. What is...

A four-year insurance policy in the amount of $20,000 was purchased two years ago. What is the adjusting entry to record insurance expense for the current year?

A.) DEBIT: Insurance Expense for $20,000; CREDIT: Prepaid Insurance for $20,000

B.) DEBIT: Insurance Expense for $5,000; CREDIT: Prepaid Insurance for $5,000

C.) DEBIT: Prepaid Insurance for $20,000; CREDIT: Insurance Expense for $20,000

D.) DEBIT: Prepaid Insurance for $5,000; CREDIT: Insurance Expense for $5,000

Expert Solution

B.) DEBIT: Insurance Expense for $5,000; CREDIT: Prepaid Insurance for $5,000

the asset is ammortised over a period of 4 years and hence expense account is debited by $5000 each year and the opposite happens in the asset account

jeff jeffy answered 2 years ago

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