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

question 89

Multiple Choice

What is the proper adjusting entry at April 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $16,000, and unexpired amounts per analysis of policies, $6,000?

• A) debit Insurance Expense, $6,000; credit Prepaid Insurance, $6,000
• B) debit Insurance Expense, $16,000; credit Prepaid Insurance, $16,000
• C) debit Prepaid Insurance, $10,000; credit Insurance Expense, $10,000
• D) debit Insurance Expense, $10,000; credit Prepaid Insurance, $10,000

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Definitions:

Company

An legal entity formed by a group of individuals to engage in and operate a business—commercial or industrial—enterprise.

Restrictive Covenants

Restrictive covenants are clauses in contracts that impose restrictions on actions that parties to the contract can take, often used in employment agreements and real estate transactions to protect business interests.

Bond Rating

An assessment of the credit quality of a bond, generally given by a rating agency.

Specific Assets

Assets that are designated for a particular use or are unique to a business's operation.