A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in: Select one: a. $200 decrease in net income. b. $200 increase in net income. c. $200 difference between the debit and credit columns of the Unadjusted Trial Balance. d. $200 of prepaid insurance. e. An error in the financial statements.

a. $200 decrease in net income.

Explanation:

When insurance is paid in advance, the entries required are;

Debit Prepaid Insurance

Credit Cash account

As time elapses and the insurance expires,

Debit Insurance expense

Credit Prepaid Insurance

Given that the Adjustments columns show expired insurance of $200, this will be recorded as an expense and will thus decrease the net income.

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"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"