Campbell County uses the consumption method to record all inventories and prepayments.The County has a 9/30 fiscal year-end.On April 1, 2015, the county purchased a two-year insurance policy at a total cost of $400,000, paying for the policy out of the general fund.In the fund financial statements, the amount of insurance expenditures for the fiscal year ended 9/30/15 would be
A)$400,000.
B)$300,000.
C)$200,000.
D)$100,000.

Question

Quizplus · Accepted Answer

The insurance policy covers two years, so the cost should be allocated over the policy period. For the fiscal year ending 9/30/15, only six months of the policy (from April 1 to September 30) should be expensed, which is $100,000 ($400,000 / 24 months * 6 months).

Campbell County Uses the Consumption Method to Record All Inventories