On March 31,2020 Exacto Company paid $5,200 for a 1-year insurance policy.To record this transaction Exacto 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

Exacto Company paid for a 1-year insurance policy, which means it has to be recorded as a prepaid expense (an asset) because the benefits of the policy will be provided in future periods. Therefore, Cash should be decreased (debit) and Prepaid Insurance should be increased (credit) to record this transaction.

On March 31,2020 Exacto Company Paid $5,200 for a 1-Year