The balance in the prepaid insurance account before adjustment at the end of the

Question

The balance in the prepaid insurance account before adjustment at the end of the year is $12,000. If the additional data for the adjusting entry is (1) "the amount of insurance expired during the year is $9,500," as compared to additional data stating (2) "the amount of unexpired insurance applicable to a future period is $2,500," for the adjusting entry:
Question 14 options:

A. the debit and credit amount for (1) would be the same as (2) but the accounts would be different

B. the accounts for (1) would be the same as the accounts for (2) but the amounts would be different

C. the accounts and amounts would be the same for both (1) and (2)

D. there is not enough information given to determine the correct accounts and amounts

Explanation / Answer

the accounts and amounts would be the same for both (1) and (2) i.e
_________________________________________
Insurance expense                   $9,500
   Prepaid Insurance expense                 $9,500
__________________________________________

For (2) "the amount of unexpired insurance applicable to a future period is $2,500," means the prepaid insurance should have balance of $2,500 relating to next accounting period.

Prepaid Insurance
Beginning balance        $12,000    Insurance expense     $9,500
                                                  Ending Balance       $2,500
_______________________________________________________
                                  $12,500                                   $12,500
========================================================

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