on october 1, 2024, golde company paid $21,000 for one year of insurance for the period, october 1, 2024…

on october 1, 2024, golde company paid $21,000 for one year of insurance for the period, october 1, 2024 through september 30, 2025. which of the following will be part of the adjusting entry on december 31, 2024?\n\na. debit prepaid insurance for $5,250\nb. debit insurance expense for $15,750\nc. debit insurance expense for $5,250\nd. debit prepaid insurance for $15,750

on october 1, 2024, golde company paid $21,000 for one year of insurance for the period, october 1, 2024 through september 30, 2025. which of the following will be part of the adjusting entry on december 31, 2024?\n\na. debit prepaid insurance for $5,250\nb. debit insurance expense for $15,750\nc. debit insurance expense for $5,250\nd. debit prepaid insurance for $15,750

Answer

Explanation:

Step1: Calculate monthly insurance expense

The total insurance cost is $21,000 for 12 months. So the monthly expense is $\frac{21000}{12}= 1750$.

Step2: Calculate insurance expense for 3 months (October - December 2024)

Number of months from October 1, 2024 to December 31, 2024 is 3. The expense is $1750\times3 = 5250$.

Step3: Determine the adjusting entry

Since insurance expense is recognized, we debit Insurance Expense (increase in expense) for $5250$.

Answer:

C. Debit Insurance Expense for $5,250