Rent-a-Wreck,Inc.paid $36,000 cash for a one-year insurance policy on July 1,2011.What adjustment should the company make before preparing its annual financial statements on December 31,2011?
A) Decrease Cash and increase Prepaid insurance by $18,000.
B) Decrease Prepaid insurance and recognize Insurance expense of $18,000.
C) Decrease Prepaid insurance and recognize Insurance expense of $36,000.
D) Decrease Cash and recognize Insurance expense of $18,000.
Correct Answer:
Verified
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