On March 31, 2015, the Turi Company Purchased a Two-Year

question 54

Multiple Choice

On March 31, 2015, the Turi Company purchased a two-year fire insurance policy. Turi recorded the purchase by debiting Prepaid Insurance and crediting Cash for $10,000. Which of the following adjusting entries should Turi prepare at the end of 2015?

• A) Prepaid Insurance 3,750 Insurance Expense 3,750
• B) Insurance Expense 3,750 Prepaid Insurance 3,750
• C) Prepaid Insurance 5,500 Insurance Expense 5,500
• D) Insurance Expense 5,000 Prepaid Insurance 5,000

---

Definitions:

Journal Entries

Records of financial transactions in the double-entry bookkeeping system, indicating the accounts and amounts to be debited and credited.

Reciprocal Services Method

An approach used to allocate costs between different departments within a company that provide services to each other, maintaining a balanced internal economy.

Support Department Costs

Expenses incurred by departments that do not directly generate revenue but support those that do.

Production Departments

Divisions or areas within a manufacturing facility where specific types of products or components are produced.