insurance expense Help

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Sep 14, 2006, 03:09 AM

aggie04

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Join Date: Sep 2006

Location: Beautiful islands of fiji

Posts: 7

insurance expense Help

insurance expense paid during the year showed a balance of $680. of this amount, $120 was not paid in advance for the following year. If no adjustment is made at balance day, the net profit for the year would be?

A. overstated by $120
B. understated by $120
C. overstated by $680
D. understated by $680

The answer is B. but i dont understand why its understated by $120.

can someone pliz help me

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