When making the adjustment for prepaid insurance,instead of writing off only the time that has passed,the entire policy was written off.This would:
A)overstate the assets.
B)overstate the liabilities.
C)understate net income.
D)None of these is correct.

Question

Quizplus · Accepted Answer

Writing off the entire prepaid insurance policy instead of just the expired portion would result in an excessive expense being recorded, which would decrease net income more than it should be, thus understating net income.

When Making the Adjustment for Prepaid Insurance,instead of Writing Off