On December 31, Year 1, the Prepaid Insurance account decreased by $4,000 as a result of the recognition of insurance expense in an adjusting entry. 

What will be an ideal response?


(D) (NA) (NA) (NA)
Insurance expense decreases net income, but does not affect cash flows. There was no cash payment to purchase insurance and thus there is no cash outflow reported in the operating activities section of the statement of cash flows.

Business

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Business