A Company Has an Asset Account, Prepaid Insurance, with a Balance

question 33

Multiple Choice

A company has an asset account, Prepaid Insurance, with a balance of $3,750 at the beginning of the month. The company used $980 of insurance during the month. Which of the following statements is true?

• A) The company should credit Insurance Expenses for $980 and debit Prepaid Insurance for $980.
• B) Retained earnings and stockholders' equity should decrease because of this transaction.
• C) The company should credit Accrued Liabilities for $980 and debit Insurance Expenses for $980.
• D) Retained earnings and stockholders' equity should be unchanged by this transaction.

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Full-Spectrum Nursing

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