The Abex Corp. spent $10,000 on a one-year insurance policy, on April 1 of Year 1. How much insurance expense should be recognized by Abex in its December 31, Year 1 income statement?
A) None
B) 2500
C) 5000
D) 7500
E) 10000

Question

Quizplus · Accepted Answer

The insurance policy covers a year from April 1, Year 1, to March 31, Year 2. By December 31, Year 1, nine months of the policy have been used. The expense recognized should be 9/12 of $10,000, which is $7,500.