On July 1, 2011 Albert Company paid $5,200 for a 1-year insurance policy.To record this transaction Albert Company should:
A)decrease cash and increase insurance expense
B)decrease cash and increase prepaid insurance
C)increase accounts payable and increase insurance expense
D)increase cash and increase prepaid insurance

Question

Quizplus · Accepted Answer

The purchase of a 1-year insurance policy is considered a prepaid expense because the coverage is for future periods. Therefore, to record this transaction, Albert Company should decrease cash (asset) and increase prepaid insurance (asset) on the balance sheet.

On July 1, 2011 Albert Company Paid $5,200 for a 1-Year