When a Prepaid Expense Is Initially Recorded as an Expense

question 142

Multiple Choice

When a prepaid expense is initially recorded as an expense, the adjusting entry would include a:

• A)debit to a contra account.
• B)debit to a prepaid expense account.
• C)debit to an unearned expense account.
• D)debit to an unearned revenue account.

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Definitions:

Voluntary Deductions

Optional deductions from an employee's paycheck, such as for health insurance or retirement savings plans.

FICA Taxes

Taxes imposed on both employees and employers to fund Social Security and Medicare, based on a percentage of the employees' wages.

Gross Earnings

The total income earned by an individual or business before any deductions or taxes.

Federal Income Taxes

Taxes imposed by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.