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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:

A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800.

B. Debit Prepaid Insurance, $1,440; credit Insurance Expense, $ 1,400.

C. Debit Prepaid Insurance, $360; credit Insurance Expense, $360.

D. Debit Insurance Expense, $360; credit Prepaid Insurance, $360.

E. Debit Insurance Expense, $360; credit prepaid Insurance, $1,440.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M970420

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