If a Company Records Prepayment of Expenses in an Asset

question 207

Multiple Choice

If a company records prepayment of expenses in an asset account, the adjusting entry would:

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

---

Definitions:

Manufacturers

Companies or individuals that produce finished goods from raw materials on a large scale.