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2. A one year insurance policy was purchased for $2,000. :. Three months has expired. a. debit to prepaid insurance for $500 b. credit to prepaid insurance for $500 c. credit to insurance expense for $1,500 d. debit to insurance expense for $1,500 . Accrued interest on note payable amounts to S100 a. credit to interest receivable for $100 b. credit to interest expense for $100 c. debit to interest expense for $100 debit to interest payable for $100

Solution

2) Adjusting entry :

So answer is b) Credit to prepaid insurance for $500

3) Adjusting entry :

So answer is c) Debit to interest expense for $100

Date	account & explanation	debit	credit
	Insurance expense (2000*3/12)	500
	Prepaid insurance		500
	(To record on three month expire)