On June 1 1,2022,Alt Blt C 2, A<B<C Company prepaid 5,000 for a ten -month Maintenance contract. On July 31,2022,Alt Blt C Company had used one month of the Maintenance Contract. Record the transaction on July 31, 2022, Choosing the appropriate answer Prepaid Maintenance decreased 500 Maintenance expense Increased 500 Prepaid Maintenance Increase 5,000 Expense Maintenance Increase 5,000 Prepaid Maintenance increased 5,000 Cash Decrease 5,000 Prepaid Maintenance Increase Maintenance Expense Decrease 500

Here's the correct way to record the transaction on July 31, 2022:<br /><br />**1. Analyze the Transaction:**<br /><br />A prepaid expense is an asset. When the prepaid is initially purchased, the asset (Prepaid Maintenance) increases, and Cash decreases. As the prepaid is *used*, the asset (Prepaid Maintenance) decreases, and an expense (Maintenance Expense) increases.<br /><br />**2. Calculate the Monthly Expense:**<br /><br />The ten-month contract cost $5,000, so the monthly cost is $5,000 / 10 months = $500/month.<br /><br />**3. Record the July 31 Transaction:**<br /><br />Since one month of maintenance has been used, we need to recognize the expense and reduce the prepaid asset. The correct entry is:<br /><br />* **Debit Maintenance Expense:** $500 (Increases the expense account)<br />* **Credit Prepaid Maintenance:** $500 (Decreases the asset account)<br /><br />**Therefore, the correct answer choice from your options is:**<br /><br />* **Prepaid Maintenance decreased $500**<br />* **Maintenance expense Increased $500**<br />