NetSolution paid premium of $2400 for insurance policy covering 2 years. which of the following best describes this entry?

Since the information from your question indicates that the insurance premium is paid for two years, you can record the initial entry for this transaction either as an asset or as an expense by using the accrual accounting method. If the transaction is recorded as an asset then the entry will be Dr. prepaid insurance and Cr. to cash accounts. Then at the end of the accounting period the expired portion will be adjusted by debiting insurance expense and crediting prepaid insurance. No reversing entry is needed.2. if the payment is initially recorded as an expense, the entry will be Dr. Insurance expense and credit cash accounts. At the end o the accounting period, the unexpired portion will be adjusted by debiting prepaid insurance and crediting the same amount to insurance expense. Then, on the first day of the second year a reversing entry which is the exact reverse of the adjusting entry will be needed. The revering entry will be Dr. prepaid insurance and cr. insurance expense accounts. The closing entry under both options is similar. but, the adjusting entry under the two options is different. This means under the first option when the entry is initially recorded as an asset, the amount to be adjusted will be the expired portion where as under the second option when the initial entry was recorded as an expense, the unexpired portion will be the amount to be adjusted. Before I come to the point in answering the question, i thing there is a typing error in your question because choice #1 and choice #3 are similar. So, the answer for your question is Dr. prepaid insurance .......2400 Cr. cash .....................................2400

The payment is covering2 years of insurance cost, therefore as per accrual basis it will be amortize over the period of2 years. Thus the correct entry will be option1,

Prepaid Insurance: Dr.

    Cash/Bank: Cr. 

Option no1..............................

I think description is important especially in the entry when you have to adjust the entries when the prepaid turns into expenses.

My answer is option-3

Debit: Prepaid Insurance  Credit: Cash or Bank ......................................................................................

My answer is1. Debit: Prepaid Insurance. Credit: Cash

Recording an expense that would benefit for long period of time is recorded as prepaid. This is an example of defferal. Eventually, these account is decreased though amortization over a period of time where it is expected to benefit the entity. 

Though initially, it could be recorded as Option 2. Debit: Insurance. Credit: Cash. and needs to be adjusted at the year of reporting period for its remaining portion. The entry at the end of reporting period would be debit Prepaid Insurance and Credit Insurance for the unamortized amount.

1 is correct option.......................................,

I and3 are the same. so both are correct.

Option,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,3

1 and3 is the right answer

Prepaid Insurance: debit.

    Cash/Bank: Credit.