Question

A company paid $1500 cash for an insurance policy providing flood protection for a three-year period. This transaction should be recorded by which of the following entries:

A. $1500 debit to Accrued Expense and a $1500 credit to Cash.

B. $1500 debit to Unexpired Insurance and a $1500 credit to Cash.

C. $1500 debit to Withdrawals and a $1500 credit to Cash.

D. 1500 debit to Accounts Payable and a $1500 credit to Cash.

Answer 1

$1500 debit to Accounts payable and a $1500 credit to cash ( D )

Step-by-step explanation:

Insurance accounts is a account that records all insurance policy payment both receivables and deductibles. since the company paid for an insurance policy and the insurance company falls in the category of Accounts payable by the company. because the insurance policy is always a renewed payment once the period been paid for has expired, while it is also recorded in the credit to cash because, the company can make insurance claims once the company is been affected by flood and this claim when paid is recorded in the credit to cash.

Answer 2

the right answer is D; 1500 debit to Accounts Payable and a $1500 credit to Cash.

Step-by-step explanation:

because insurance is a sub-account that is part of the group of accounts payable, and when money is received for this service the account is debited, and since the cash account was used to cover this payment, it is credited for having decreased its cash in box