accounting advice?

Question

30

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $15,500, and unexpired amounts per analysis of policies, $4,500?

A. debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500

B. debit Insurance Expense, $15,500; credit Prepaid Insurance, $15,500

C. debit Prepaid Insurance, $11,500; credit Insurance Expense, $11,500

D. debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

Answer 1

D.... you have to take it out of prepaid and put it into an expense account... since an expense account has a natural debit balance you must debit insurance expense and credit prepaid expense for the amount used

Answer 2

if $4500 is the unexpired amount, then this should be your balance in prepaid insurance at the end of the fiscal year. since the unadjusted balance is $15500, you have to decrease it by 11000 in order to get to $4500. your entry would be to:

Debit Insurance expense 11000
Credit prepaid insurance 11000

choice D.