All of the Following Are True Regarding Prepaid Expenses Except

question 76

Multiple Choice

All of the following are true regarding prepaid expenses except:

• A) They are paid for in advance of receiving their benefits.
• B) When they are used, their costs become expenses.
• C) They are assets.
• D) The adjusting entry for prepaid expenses increases expenses and decreases liabilities.
• E) The adjusting entry for prepaid expenses increases expenses and decreases assets.

---

Definitions:

Prices Charged

The amount of money demanded by a business in exchange for its goods or services.

Long Run

A period during which all factors of production and costs are variable, allowing firms to adjust to desired levels.

Gas Station

A retail establishment that sells fuel and often other goods or services to motor vehicle customers.

Long-Run Equilibrium

A state in which all firms in an industry are making normal profit and there is no incentive for market entry or exit.