Allied, Inc

question 68

Multiple Choice

Allied, Inc. bought a 3-year insurance policy on August 1 for $3,900. Assume no other adjusting entries have been done this fiscal year. The adjusting entry on December 31 would be:

• A)debit Insurance Expense, $108; credit Prepaid Insurance, $108.
• B)debit Prepaid Insurance, $108; credit Insurance Expense, $108.
• C)debit Insurance Expense, $542; credit Prepaid Insurance, $542.
• D)debit Prepaid Insurance, $542; credit Insurance Expense, $542.

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Definitions:

Merchandise Inventory

Goods and products that a retailer or wholesaler has on hand to sell to customers.

Buyer

A person or organization that purchases goods or services for personal use or consumption.

Asset

Assets possessed by a corporation that hold financial worth and can yield advantages in the future.

Receiving Report

A document prepared by the receiving department to record and confirm the delivery of goods from a supplier.