A company purchase QUESTION 27 A company purchases a oneyear

A company purchase

QUESTION 27 A company purchases a oneyear insurance policy on june 1 for $2,760. The adjusting entry on December 31 O debit Insurance Expense, $1,380 and credit Prepaid Insurance, $1,380. O debit Isurance Expense, $1,150 and credit Prepaid Insurance, $1,150. O debit Insurance Expense, $1,610, and credit Prepaid Insurance, $1,610. O debit Prepaid Insurance, $1,380, and credit Cash, $1,380.

Solution

Answer is C:

Prepaid insurance a/c

To Cash a/c

(being insurance policy purchased)

$2760

Insurance Expenses a/c

To Prepaid insurance a/c

(Being insurance expenses recognised for 7 months (June-1 to Dec- 31)

$1610

Date	Journal Entry	Debit	Credit
June -1	Prepaid insurance a/c To Cash a/c (being insurance policy purchased)	$2760	$2760
December-31	Insurance Expenses a/c To Prepaid insurance a/c (Being insurance expenses recognised for 7 months (June-1 to Dec- 31)	$1610	$1610