On April 1,2011,the Premium on a One-Year Insurance Policy Was

question 37

Multiple Choice

On April 1,2011,the premium on a one-year insurance policy was purchased for $3,000 cash with the insurance coverage beginning on that date.Which of the following correctly describes the effect of the December 31,2011 adjusting entry on the financial statements? (Assume that no adjusting entries have been made during the year.)

• A)Prepaid insurance will decrease $750.
• B)Insurance expense will increase $750.
• C)Insurance expense will increase $2,250.
• D)Prepaid insurance will increase $2,250.

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Definitions:

Hypnagogic Sensations

Experiences occurring at the onset of sleep, including visual, auditory, or physical sensations that can seem vividly real.

Alpha Wave

A type of brainwave detected by an EEG that occurs when a person is relaxed, but alert, typically with closed eyes.

Sleep-Inducing Hormone

Melatonin, a hormone produced by the pineal gland that regulates sleep and wakefulness.

Melatonin

A chemical substance secreted by the pineal gland in reaction to lack of light, which controls the rhythm of sleeping and waking.