Sam purchased a four-year insurance policy for $7,200. The adjusting entry for one month would include a:

A) debit to Insurance Expense, $150.
B) credit to Cash, $150.
C) debit to Prepaid Insurance, $150.
D) credit to Insurance expense, $150.

Insurance Policy

A legal contract between an insurer and the insured, outlining the terms, coverages, premiums, and conditions under which the insurer agrees to compensate the insured.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate revenues and expenses to the period in which they actually occurred.

Prepaid Insurance

Insurance premiums paid in advance for coverage that extends into future accounting periods.