On November 1, 20X8, your calendar year company pays $1,200 for 12 months’ insur
ID: 2536762 • Letter: O
Question
On November 1, 20X8, your calendar year company pays $1,200 for 12 months’ insurance, recording it as an expense. Just before closing the books, you realize that no adjusting entry was made. The correcting entry will:
not be necessary
debit Insurance Expense for $200; credit Prepaid Insurance for $200
debit Insurance Expense for $1,000; credit Prepaid Insurance for $1,000
debit Prepaid Insurance for $200; credit Insurance Expense for $200
debit Prepaid Insurance for $1,000; credit Insurance Expense for $1,000
not be necessary
debit Insurance Expense for $200; credit Prepaid Insurance for $200
debit Insurance Expense for $1,000; credit Prepaid Insurance for $1,000
debit Prepaid Insurance for $200; credit Insurance Expense for $200
debit Prepaid Insurance for $1,000; credit Insurance Expense for $1,000
Explanation / Answer
Insurance expense has to be written back for 10 months debit Prepaid Insurance for $1,000; credit Insurance Expense for $1,000
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