Question

multiple select question
select all that apply
a 12-month insurance policy was purchased on dec. 1 for $4,800 and the prepaid insurance account was initially increased for the payment. the required adjusting journal entry on december 31 includes a:
credit to prepaid insurance for $400.
debit to insurance expense for $4,800.
debit to insurance expense for $400.
credit to insurance expense for $400.
debit to prepaid insurance for $400.

Explanation:

Step1: Calculate monthly insurance cost

$\frac{\$4,800}{12} = \$400$

Step2: Identify adjusting entry logic

After 1 month, $400 of prepaid insurance is used, so we recognize $400 as insurance expense (debit the expense account) and reduce the prepaid insurance asset (credit the prepaid account).

Step3: Match to correct options

The valid entries are a debit to Insurance Expense for $400 and a credit to Prepaid Insurance for $400.

Answer:

• credit to Prepaid Insurance for $400.
• debit to Insurance expense for $400.