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Mal De Mere Cruises Purchased a Five-Year Insurance Policy for Its

Question 221

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Mal de Mere Cruises purchased a five-year insurance policy for its ships on April 1 2016 for $50000. Assuming that April 1 is the effective date of the policy the adjusting entry on December 31 2016 is a.  Prepaid Insurance 7,500 Insurance Expense. 7,500\begin{array}{lrr}\text { Prepaid Insurance }&7,500\\\text { Insurance Expense. } &&7,500 \\\end{array}

b.  Insurance Expense7,500 Prepaid Insurance 7,500\begin{array}{lrr}\text { Insurance Expense} & 7,500 \\\text { Prepaid Insurance } &&7,500 \\\end{array}

c.  Insurance Expense 10,000 Prepaid Insurance 10,000\begin{array}{lrr} \text { Insurance Expense } & 10,000 \\ \text { Prepaid Insurance } &&10,000 \\\end{array}

d.  Insurance Expense 2,500 Prepaid Insurance 2,500\begin{array}{lrr}\text { Insurance Expense } &2,500\\\text { Prepaid Insurance }&&2,500\end{array}

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