The Balance in the Prepaid Insurance Account Before Adjustment at the End

question 68

Multiple Choice

The balance in the Prepaid Insurance account before adjustment at the end of the year is $720, which represents twelve months' insurance purchased on December 1. The adjusting entry required for the month of December, on December 31, the end of the fiscal year, is

• A) debit Insurance Expense, $60; credit Prepaid Insurance, $60.
• B) debit Insurance Expense, $660; credit Prepaid Insurance, $660.
• C) debit Prepaid Insurance, $60; credit Insurance Expense, $60.
• D) debit Prepaid Insurance, $720; credit Insurance Expense, $720.
• E) debit Insurance Expense, $60; credit Insurance Payable, $60.

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Definitions:

Raise Profits

Efforts or strategies implemented by a company aimed at increasing its net earnings or bottom line, through means such as reducing costs, increasing sales, or enhancing productivity.

Two-part Tariff

A pricing strategy that involves a fixed fee plus a variable charge based on the amount of goods or services consumed.

Marginal Cost

The financial outlay for making an additional unit of a good or service.

Profit-maximizing

A strategy or process employed by firms aiming to achieve the highest possible profit by adjusting factors such as output, price, and input use.