Baltimore Company paid cash to purchase insurance that would protect the company during the coming year....

Baltimore Company paid cash to purchase insurance that would protect the company during the coming year. The recognition of this event would

cause total assets to decrease.
cause total equity to increase.
not affect total assets or equity.
not affect net income or cash flow.

Expert Solution

C) Not affect total assets or equity

As cash is paid now, but the prepaid insurance will increase which is also current asset, therefore net effect on total assets is zero and there will also be no effect on equity.

ekkarill92 answered 2 years ago

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