What Is the Proper Adjusting Entry at June 30, the End

question 167

Multiple Choice

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $18,500, and unexpired amounts per analysis of policies of $6,000?

• A) Debit Insurance Expense, $6,000; Credit Prepaid Insurance, $6,000.
• B) Debit Insurance Expense, $18,500; Credit Prepaid Insurance, $18,500.
• C) Debit Prepaid Insurance, $12,500; Credit Insurance Expense, $12,500.
• D) Debit Insurance Expense, $12,500; Credit Prepaid Insurance, $12,500.

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Definitions:

Compounded Annually

Interest on an investment that is calculated at the end of the year on both the initial principal and the accumulated interest from previous periods.

Invests

The initiative of funneling financial capitals in order to gain profits or generate income.

Trust Fund

A legal arrangement where assets are held and managed by one party for the benefit of another, often used for inheritance, to manage charity donations, or to protect assets.

Interest Rate

The fraction of a loan incurred as interest by the borrower, commonly indicated as a yearly percentage.