If a Company Records Prepayment of Expenses in an Asset

question 233

Multiple Choice

If a company records prepayment of expenses in an asset account, the adjusting entry when all or part of the prepaid asset is used or expired would:

• A) Result in a debit to a liability and a credit to an asset account.
• B) Decrease cash.
• C) Result in a debit to an expense and a credit to an asset account.
• D) Cause an accrued liability account to exist.
• E) Cause an adjustment to prior expense to be overstated and assets to be understated.

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Definitions:

Markets

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Two-way symmetrical

A public relations model emphasizing mutual understanding and balanced power between an organization and its stakeholders through dialogue and negotiation.

Effective Communications

The art and technique of sharing information in a way that the message is successfully received, understood, and responded to.

Symbolic-interpretive

An approach in social science that focuses on understanding the role of symbols, meanings, and interpretations in human behavior and organizational culture.