Mary Chain Investments purchased an 18-month insurance policy on May 31, 2022 for $3,600.The December 31, 2022 balance sheet would report Prepaid Insurance of

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Since the policy was purchased on May 31, 2022 and the balance sheet date is December 31, 2022 (7 months after policy purchase), only 11 months of insurance coverage would remain unused. Therefore, the balance sheet would report Prepaid Insurance of $2,200 ($3,600/18 months x 11 months remaining). Choice D is incorrect since the entire $3,600 payment cannot be expensed in one year and must be allocated over the policy period, which is 18 months. Choice A is incorrect since Prepaid Insurance is reported on the balance sheet, not the income statement. Choice B is incorrect since it does not take into account the remaining insurance coverage period.

Mary Chain Investments Purchased an 18-Month Insurance Policy on May