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235 On July 1st, a company paid $12,000 for an annual insurance policy covering the month of

July through the following June. Which of the following statements reflects how this payment would

be recorded on July 1st under the accrual method?

A. Cash would be debited for $12,000, and accrued insurance would be credited for $12,000.

B. Insurance expense would be debited for $12,000, and cash would be credited for $12,000.

C. Prepaid insurance would be debited for $12,000, and cash would be credited for $12,000.

D. Prepaid insurance would be debited for $12,000, and accrued insurance would be credited for

$12,000.

Answer: C