Practice prompt · Q:transactions-to-statements/prepaid-insurance-entry-002

Pay for future insurance coverage

Choose the debit and credit for an insurance premium paid before coverage is used.

Updated Aug 30, 2026 Review due Nov 30, 2026

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Cedar Lane Consulting pays $9,600 cash for 12 months of insurance coverage. The coverage begins tomorrow. Which entry records the payment date?

Choose the best answer. A Prepaid Insurance $9,600 Cash $9,600 B Insurance Expense $9,600 Cash $9,600 C Cash $9,600 Prepaid Insurance $9,600 D Prepaid Insurance $9,600 Accounts Payable $9,600

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Answer: A

Prepaid Insurance $9,600 Cash $9,600

Prepaid Insurance increases by $9,600 and Cash decreases by $9,600. Both are assets, so the entry debits Prepaid Insurance and credits Cash.