Campbell County uses the consumption method to record all inventories and prepayments. The County has a 9/30 fiscal year-end. On April 1, 2018, 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 9/30/18 would be
A) $400,000.
B) $300,000.
C) $200,000.
D) $100,000.

Question

Quizplus · Accepted Answer

The insurance policy covers a two-year period at a total cost of $400,000. Since the fiscal year ends on 9/30 and the policy was purchased on 4/1/2018, only six months of the policy would be applicable to the fiscal year ending 9/30/18. Therefore, the expenditure recognized for this period would be $100,000 ($400,000 total cost divided by 24 months times 6 months).

Campbell County Uses the Consumption Method to Record All Inventories