On 1 July 2014 Tan Traders Paid $600, Representing a Two-Year

Multiple Choice

On 1 July 2014 Tan Traders paid $600, representing a two-year insurance premium. The $600 was initially recorded in the insurance expense account. The correct adjusting entry on 31 December 2014, the close of the annual accounting period, is which of the following?

A) Debit prepaid insurance $450; credit insurance expense $450
B) Debit prepaid insurance $150; credit insurance expense $150
C) Debit prepaid insurance $300; credit insurance expense $300
D) Debit insurance expense $150; credit prepaid insurance $150