Question

Your company purchased a twelve-month insurance policy for $36,000 in January. 

What's the entry to record the monthly insurance expense in March? 

SELECT ONLY ONE 

• Debit Accrued Payables $3,000 Credit Insurance Expense $3,000 

• Debit Insurance Expense $3,000 Credit Cash $3,000 

• Debit Prepaid Insurance $3,000 Credit Insurance Expense $3,000 

• Debit Insurance Expense $3,000 Credit Accrued Liabilities $3,000 

• Debit Insurance Expense $3,000 Credit Prepaid Insurance $3,000

Answer 1

given that

Insurance policy = $36,000

Duration = 12 months

First we calculate the monthly entry.

This is calculated by dividing the cost of insurance by the term of insurance.

Monthly expenses = cost/months

Expenditure = $36,000/12

Expenditure = $3,000

Journal entries recording monthly insurance costs for March are listed below.

Date Accounts and Explanations

Insurance costs $3,000 (debit)

Prepaid premiums $3,000 (credits)

Answer 2

Adjusting entry

date	account and explanation	Debit	Credit
	Insurance expense (36000/12)	3000
	Prepaid insurance		3000

So answer is e) Debit insurance expense $3000; Credit prepaid insurance $3000

Answer 3

[REMOVED]