On December 31, 2012, Lanigan Company prepaid the premium of $6,000 cash for ins

Question

On December 31, 2012, Lanigan Company prepaid the premium of $6,000 cash for insurance coverage during January 2013. Which of the following would be the correct entry to record this transaction? Question 3 options: Increase in prepaid insurance expense, an asset, of $6,000 and decrease in cash of $6,000. Decrease in insurance payable of $6,000, with no effect on net income or retained earnings, and an increase in cash of $6,000. Increase in insurance expense, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000. Increase in prepaid insurance expense, an asset, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000. On December 31, 2012, Lanigan Company prepaid the premium of $6,000 cash for insurance coverage during January 2013. Which of the following would be the correct entry to record this transaction? On December 31, 2012, Lanigan Company prepaid the premium of $6,000 cash for insurance coverage during January 2013. Which of the following would be the correct entry to record this transaction? Increase in prepaid insurance expense, an asset, of $6,000 and decrease in cash of $6,000. Decrease in insurance payable of $6,000, with no effect on net income or retained earnings, and an increase in cash of $6,000. Increase in insurance expense, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000. Increase in prepaid insurance expense, an asset, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000. Increase in prepaid insurance expense, an asset, of $6,000 and decrease in cash of $6,000. Decrease in insurance payable of $6,000, with no effect on net income or retained earnings, and an increase in cash of $6,000. Increase in insurance expense, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000. Increase in prepaid insurance expense, an asset, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000. Increase in prepaid insurance expense, an asset, of $6,000 and decrease in cash of $6,000. Decrease in insurance payable of $6,000, with no effect on net income or retained earnings, and an increase in cash of $6,000. Increase in insurance expense, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000. Increase in prepaid insurance expense, an asset, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000.

Explanation / Answer

Increase in prepaid insurance expense, an asset, of $6,000 and decrease in cash of $6,000.

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