Answered: What account should be credited in the…

What account should be credited in the journal (2) and for what amount to record the adjusting entry for insurance based on this information?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The balance in the prepaid insurance account before adjustment on December 31, 2007 is $5,000. The amount of expired insurance is $2,000. What account should be credited in the journal (2) and for what amount to record the adjusting entry for insurance based on this information?

JOURNAL Page 25

date	description	p.ref.	debit	CREDIT
	Adjusting Entries
12/31	(1)		?
	(2)			?

Group of answer choices

Prepaid Insurance $3,000

Prepaid Insurance $2,000

Insurance Expense $2,000

Insurance Expense $3,000

Definition Definition Entries made at the end of every accounting period to precisely replicate the expenses and revenue of the current period. This is also known as end of period adjustment. It can also refer to financial reporting that corrects errors made previously in the accounting period. Every adjustment entry affects at least one real account and one nominal account.

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