Question

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31? (Select all that apply.)
A. A company records interest expense that has accrued, but will not be paid until next year.
B. A company pays a 6-month insurance premium at the beginning of October.
C. A company pays a utility bill for charges incurred in the previous month.
D. A company pays for 4 months of advertising in the Wall Street Journal on November 1.

Answer 1

Answer:

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31? (Select all that apply.)

B. A company pays a 6-month insurance premium at the beginning of October.

D. A company pays for 4 months of advertising in the Wall Street Journal on November 1.

Explanation:

B. A company pays a 6-month insurance premium at the beginning of October.

Record expenses for 3 months. Oct-nov-dec. Otrher 3 months are prepaid expenses.

D. A company pays for 4 months of advertising in the Wall Street Journal on November 1.

Record expenses for 2 months. Nov-Dec. Other 2 months are prepaid expenses.