James & Younger Corporation Purchased a One-Year Insurance Policy in January

question 148

Multiple Choice

James & Younger Corporation purchased a one-year insurance policy in January 2022 for $42000.The insurance policy is in effect from March 2022 through February 2023.If the company neglects to make the proper year-end adjustment for the expired insurance:

• A)net income and assets will be understated by $35000.
• B)net income and assets will be overstated by $35000.
• C)net income and assets will be understated by $7000.
• D)net income and assets will be overstated by $7000.

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Definitions:

Credit Application

A form or request submitted by an individual or business seeking to obtain credit from a lending institution.

Defaults

Failure to fulfill an obligation, especially failure to meet a financial obligation or to appear in a court of law.

Guarantor

An individual or organization that commits to taking on the debt or fulfilling the contract obligations of another party if that initial party does not uphold their responsibilities.

Subrogation

The legal process by which one party assumes the rights of another party to recover debts or damages paid on their behalf.