試題詳解

1. Trans Company debited Prepaid Insurance for $1，320 on July 1，2014，for a one-year fire insurance policy. If the company prepares monthly financial statements, failure to make an adjusting entry on July 31 for the amount of insurance that has expired would cause:
(A) assets to be overstated by $1, 320 and expenses to be understated by $1，320.
(B) expenses to be overstated by $110 and assets to be understated by $110.
(C) assets to be overstated by $110 and expenses to be understated by $110.
(D) expenses to be overstated by $1，320 and assets to be understated by $1，320.