Rent-A-Wreck,Inc

question 30

Multiple Choice

Rent-a-Wreck,Inc.paid $12,000 cash for a one-year insurance policy on November 1,2012.What adjustment should the company make before preparing its annual financial statements on December 31,2012?

• A)Decrease Cash and increase Prepaid insurance by $2,000.
• B)Decrease Cash and recognize Insurance expense of $12,000.
• C)Decrease Prepaid insurance and recognize Insurance expense of $1,000.
• D)Decrease Prepaid insurance and recognize Insurance expense of $2,000.

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