On July 1, 2011 Albert Company Paid $5,200 for a 1-Year

question 3

Multiple Choice

On July 1, 2011 Albert Company paid $5,200 for a 1-year insurance policy.To record this transaction Albert Company should:

• A)decrease cash and increase insurance expense
• B)decrease cash and increase prepaid insurance
• C)increase accounts payable and increase insurance expense
• D)increase cash and increase prepaid insurance

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Definitions:

Cash Distributions

Payments made in cash by a corporation to its shareholders, typically from earnings or profits.

Tax-exempt Income

Income that is not subject to federal income tax, such as certain interest income from municipal bonds.

Ordinary Income

Income earned from standard operations, subject to standard tax rates, including wages, salaries, commissions, and interest.

Distributed

In finance, refers to the allocation of dividends or other payouts to shareholders from a corporation's earnings.