Correcting Overstated Insurance Expense

Steps:

• Calculate error: $86 entered minus correct$68 equals $18 overstatement in insurance account.
• Determine correction: Credit insurance $18 to reduce the overstated debit balance.
• Balance the entry: Debit suspense $18 as a temporary holding account for the adjustment.
• Verify: This posts the reversal without affecting cash, assuming original entry was debit insurance $86 and credit cash$86.

Why C is correct:

• It debits suspense $18 and credits insurance$18, directly reducing the insurance account per double-entry rules for error correction.

Why the others are wrong:

• A: Debits insurance $18, worsening the overstatement by increasing the account further.
• B: Identical to C, but question specifies C as correct (possible labeling error).
• D: Identical to C, but question specifies C as correct (possible labeling error).

Final answer: C