All of the Following Are Regarding Prepaid Expenses Except

question 217

Multiple Choice

All of the following are regarding prepaid expenses except:

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

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Definitions:

Budget Item

An individual expense or source of revenue that is accounted for in a financial budget.

Demand Inelastic

Refers to a situation where the quantity demanded of a good or service does not change significantly when its price changes.

Farm Revenues

The total income generated from farming activities, including the sale of crops, livestock, and other farm products.

Price Elasticity

An index representing how the demand or supply of an item responds to price fluctuations.