The Prepaid Insurance Account of Tan Traders Shows a Balance

Multiple Choice

The prepaid insurance account of Tan Traders shows a balance of $600, representing a payment on 1 July 2014 of a two-year insurance premium. After adjustment at 31 December 2014, the close of the annual accounting period:

A) insurance expense in the income statement is $600 and prepaid insurance in the balance sheet is $0.
B) insurance expense in the income statement is $150 and prepaid insurance in the balance sheet is $450.
C) insurance expense in the income statement is $0 and prepaid insurance in the balance sheet is $600.
D) insurance expense in the income statement is $300 and prepaid insurance in the balance sheet is $300.