GB 518 Course Great Wisdom / tutorialrank.com GB 518 Course Great Wisdom / tutorialrank.com | Page 15

year period. Apricot follows a policy of recording all prepaid
expenses to asset accounts at the time of cash payment.
The adjusting entry on December 31, 2011 for Apricot would include:

A debit to an expense for $1,250

A debit to a prepaid expense for $1,250

A credit to an expense for $3,750

A debit to a prepaid expense for $3,750

A credit to a liability for $1,250

Question 24. Question :
On January 1 a company purchased a
five-year insurance policy for $1,800 with coverage starting
immediately. If the purchase was recorded in the Prepaid Insurance
account and the company records adjustments only at year-end, the
adjusting entry at the end of the first year is: