A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Bala

Question

A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in: a) $200 less in net income
b) $200 difference between the debit and credit columns of the Unadjusted Trial Balance
c) An error in the financial statements
d) $200 more in net income
e) $200 of prepaid insurance
A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in: a) $200 less in net income
b) $200 difference between the debit and credit columns of the Unadjusted Trial Balance
c) An error in the financial statements
d) $200 more in net income
e) $200 of prepaid insurance
a) $200 less in net income
b) $200 difference between the debit and credit columns of the Unadjusted Trial Balance
c) An error in the financial statements
d) $200 more in net income
e) $200 of prepaid insurance
a) $200 less in net income
b) $200 difference between the debit and credit columns of the Unadjusted Trial Balance
c) An error in the financial statements
d) $200 more in net income
e) $200 of prepaid insurance

Explanation / Answer

Answer ) A. The expired portion should be reclassified to insurance expense by Debiting Insurance exp. and Crediting Prepaid insurance, thus, higher expense results decrease in Net income.

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