Fred company paid $48,000 for a two-year insurance policy, ($2,000 per month), on october 1 and recorded the $48,000 as a debit to prepaid insurance and a credit to cash. what adjusting entry should fred make on december 31, the end of the accounting period (no previous adjustment has been made)? select one: a. debit: prepaid insurance 6,000 credit: insurance expense 6,000 b. debit : insurance expense 6,000 credit: prepaid insurance 6,000 c. debit: insurance expense 24,000 credit: prepaid insurance 24,000 d. debit: prepaid insurance 42,000 credit: insurance expense 42,000

The adjusting entry Fred should make on December 31, the end of the accounting period:

b. Debit : Insurance Expense 6,000 Credit: Prepaid Insurance 6,000

Explanation:

On October 1, Fred Company paid $48,000 for a two-year insurance policy, ($2,000 per month)

From October 1 to December 31, Fred Company has used the insurance for 3 months.

Insurance Expense = $2,000 x 3 = $6,000

The adjusting entry Fred should make on December 31, the end of the accounting period:

Debit Insurance Expense $6,000

Credit Prepaid Insurance $6,000

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