Transaction 5 - provides a future benefit. Therefore, an...

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Transaction 5 : On April 5, Mr. Green pays $1,200 for a one-year insurance contract that protects his  business from April 1 until March 31 of the following year. Given the length of time this contract is in  effect, the matching principle requires that the contract's cost initially be recorded as an asset since it 
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Unformatted text preview: provides a future benefit. Therefore, an asset (prepaid insurance) increases and is debited for $1,200. Another asset account (cash) decreases and is credited for $1,200....
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This note was uploaded on 11/14/2011 for the course ACCT 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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