If a Company Records Prepayment of Expenses in an Asset

Multiple Choice

If a company records prepayment of expenses in an asset account, the adjusting entry when all or part of the prepaid asset is used or expired would:

A) Result in a debit to a liability and a credit to an asset account.
B) Decrease cash.
C) Result in a debit to an expense and a credit to an asset account.
D) Cause an accrued liability account to exist.
E) Cause an adjustment to prior expense to be overstated and assets to be understated.