On October 1 2014 Adams Company paid 3840 for a twoyear insu

On October 1, 2014, Adams Company paid $3,840 for a two-year insurance policy with the insurance coverage beginning on that date. As of December 31, 2014, which of the following account balances are correct after adjusting entries have been made? Prepaid insurance $1,920, and Insurance expense $1,920. O Prepaid insurance $3,360, and Insurance expense $480. O Prepaid insurance $0, and Insurance expense $3,840. O Prepaid insurance $3,840, and Insurance expense $o.

Solution

Prepaid insurance 3360 and insurance expense 480 Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Amount Amount paid for insurance policy                  3,840.00 Time in years                          2.00 Time in months = 2 * 12                        24.00 Time from Oct 01 to Dec 31 in months                          3.00 Insurance expense for 2014 = 3840/24*3                      480.00 Remaining balance in prepaid Insurance = 3840 - 480                  3,360.00 Insurance expense                      480.00