On July 1, 20X3, ABC Company debited Insurance Expense for a $12,000 prepayment it made for insurance coverage for two years from July 1, 20X3, through June 30, 20X5.

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If Insurance Expense is not adjusted as of December 31, 20X3...

A.expenses will be overstated by $3,000

B.assets will be understated by $9,000

C.net income will be overstated by $9,000

D.retained earnings will be understated by $3,000

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An adjusting entry is necessary as of December 31, 20X3 to properly reflect...

A.accrual of expense

B.correction of the expense accrual

C.deferred expense

D.the ledger Cash account balance