In Its First Period of Operations, Weatherford Company Purchased a 12-Month

Multiple Choice

In its first period of operations, Weatherford Company purchased a 12-month insurance policy costing $12,000 on July 1. The company debited an asset account for the full amount. Assuming that the company only makes adjusting entries annually, at the end of its fiscal year on October 31, the adjusting journal entry to be made is

A) Debit Insurance Expense, $8,000; Credit Prepaid Insurance, $8,000.
B) Debit Prepaid Insurance, $3,000; Credit Insurance Expense, $3,000.
C) Debit Insurance Expense, $4,000; Credit Prepaid Insurance, $4,000.
D) Debit Prepaid Insurance, $12,000; Credit Cash, $12,000.