The premium on a 3-year insurance policy expiring on December 31, 2022 was paid in total on January 1, 2020. The original payment was initially debited to prepaid insurance. The appropriate adjusting entry had been recorded on December 31, 2020. Which statement will be incorrect? A. Insurance expense increased by amount equivalent to 1 year on December 31, 2020. B. Prepaid insurance balance on December 31, 2020 should be the same as it would have been if the original payment had been debited initially to an expense account. C. Prepaid insurance balance on December 31, 2021 is lower than the balance on December 31, 2020. D. none of the above
The premium on a 3-year insurance policy expiring on December 31, 2022 was paid in total on January 1, 2020. The original payment was initially debited to prepaid insurance. The appropriate adjusting entry had been recorded on December 31, 2020. Which statement will be incorrect? A. Insurance expense increased by amount equivalent to 1 year on December 31, 2020. B. Prepaid insurance balance on December 31, 2020 should be the same as it would have been if the original payment had been debited initially to an expense account. C. Prepaid insurance balance on December 31, 2021 is lower than the balance on December 31, 2020. D. none of the above
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
8. The premium on a 3-year insurance policy expiring on December 31,
2022 was paid in total on January 1, 2020. The original payment was
initially debited to prepaid insurance. The appropriate
been recorded on December 31, 2020. Which statement will be incorrect?
A. Insurance expense increased by amount equivalent to 1 year on December 31, 2020.
B. Prepaid insurance balance on December 31, 2020 should be the same as it would have been if the original payment had been debited initially to an expense account.
C. Prepaid insurance balance on December 31, 2021 is lower than the balance on December 31, 2020.
D. none of the above
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education