Question

Required information (The following information applies to the questions displayed below.) A company makes the payment of a one-year insurance premium of $3,144 on March 1, 2019. Prepaid expenses reflects as an asset for more meaningful net income amount. True or False True False

Answer 1

TRUE

Prepaid expenses reflects as an asset for more meaningful net income amount

Prepaid expenses are recorded in Prepaid Asset account when the amount is paid in advance.

At the end of accounting period, adjusting entries are prepared to recognize expired portion of prepaid expense by credit to Prepaid Asset account.