A Company shows $22,000 of insurance expense for the fiscal year. The company records showed a balance in prepaid insurance at the beginning of the year of $5,000 and a balance at the end of the year of $3,000. What amount of cash was paid for insurance during the year?
A) $2,000
B) $22,000
C) $20,000
D) $25,000

Question

Quizplus · Accepted Answer

The amount of prepaid insurance used during the year can be calculated by subtracting the ending balance from the beginning balance:

Prepaid insurance used = beginning balance - ending balance 
                        = $5,000 - $3,000 
                        = $2,000

The total amount of insurance expense for the year includes both the prepaid insurance used and the amount of insurance paid during the year. Therefore, the amount of insurance paid during the year can be calculated by subtracting the prepaid insurance used from the total insurance expense for the year:

Insurance paid = insurance expense - prepaid insurance used 
                     = $22,000 - $2,000 
                     = $20,000

Therefore, the answer is C) $20,000.

A Company Shows $22,000 of Insurance Expense for the Fiscal