An Example of an Adjusting Entry for a Prepaid Item

question 11

Multiple Choice

An example of an adjusting entry for a prepaid item using the QBO journal is:

• A) \[\begin{array} { l c c }
• &\text { Debit } & \text { Credit } \\
• \text { Insurance Expense } &\$ 1,000\\
• \text { Prepaid Insurance } & &\$ 1,000 & \\
• \end{array}\]
• B) \[\begin{array} { l c c }
• &\text { Debit } & \text { Credit } \\
• \text { Prepaid Insurance} &\$ 1,000\\
• \text { Insurance Expense } & &\$ 1,000 & \\
• \end{array}\]
• C) \[\begin{array} { l c c }
• &\text { Debit } & \text { Credit } \\
• \text { Insurance Expense} &\$ 1,000\\
• \text { Insurance Payable} & &\$ 1,000 & \\
• \end{array}\]
• D) \[\begin{array} { l c c }
• &\text { Debit } & \text { Credit } \\
• \text { Insurance Payable} &\$ 1,000\\
• \text { Insurance Expense } & &\$ 1,000 & \\
• \end{array}\]

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Definitions:

Net Present Value

A financial metric that calculates the present value of all cash flows (both incoming and outgoing) expected from an investment, adjusted for time and interest.

After-Tax Net

The amount of money left after all applicable taxes have been deducted from gross income or profit.

Cash Inflow

The total amount of money being transferred into a business, project, or financial product during a specific period, often resulting from sales, financing, or investments.

Incremental Sales

The additional revenue generated from a particular marketing or sales activity, beyond the ordinary sales figures.