On January 1,2019,Ryan Company paid the premium on a three-year insurance policy in the amount of $6,000.At that time,the full amount paid was recorded as prepaid insurance.After recording the adjusting entry for the insurance policy on December 31,2019,what would be the balance in Ryan Company's prepaid insurance account?

Question

Quizplus · Accepted Answer

The premium for the three-year insurance policy is $6,000, covering 36 months. After one year (12 months), one-third of the policy has been used, leaving two-thirds unused. Therefore, $6,000 * (2/3) = $4,000 remains as the balance in the prepaid insurance account after the adjusting entry for the first year.

On January 1,2019,Ryan Company Paid the Premium on a Three-Year