Prepaid Insurance Question

On November 1, 2007, Pilot Company paid $1200 in advance for an insurance policy that covered the company for six months. Assuming that Pilot recorded this purchase as an asset, the adjusting entry
required on December 31, 2007 would include: a) a debit to Prepaid Insurance for $1200 b) a credit to Prepaid Insurance for $1200 c) a credit to Insurance Expense for $400 d) a debit to Insurance Expense for $400
My thought is that the answer would be c) a credit to Insurance Expense for $400 since only two months have been used. The credit would take away from the asset that was debited earlier. Is my thinking correct? If not can you please explain?
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Oh please!!
What level of accounting class is this, and what is your major?
Take your book, I know you have one, and bone up on what side of the "T" account you generally record assets, liabilities, equity, revenues and expenses. From that information - it's in your book - you'll be able to answer this and many other questions.
--
Paul A. Thomas, CPA
Athens, Georgia
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Level 1 and Biology so accounting is not very important to me.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
One day you'll be looking at being responsible for a million dollar biology grant. You had better have at least a basic concept of accounting.
Accounts that generally have a Debit balance are: Assets and Expenses.
Meaning, that if you buy a desk with cash, you decrease cash (a credit entry reduces an account that has a debit balance) and you debit furniture, which being a debit balance account would increase that account. When you pay the power bill for the office, you again credit cash and debit the electricity expense.
Now, look at the transaction again and see if you can figure it out.
--
Paul A. Thomas, CPA
Watkinsville, Georgia
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here. All logos and trade names are the property of their respective owners.

Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.