Question: On March 3 1 , 2 0 X 8 , your calendar year company takes out a 3 - year insurance policywith a premium of

On March 31,20X8, your calendar year company takes out a 3-year insurance policywith a premium of $4,000 a year and pays the entire $12,000 in advance, booking it asprepaid insurance. At year-end 20X8, you discover that the adjusting entry debits InsuranceExpense and credits Prepaid Insurance for $4,000. If you do not correct this:a. net income will be understatedb. assets will be overstatedc. liabilities will be understatedd. none of the above

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