On April 1,a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date.What amount of the insurance expense will be reported on the annual income statement for the year ended December 31?
A)$1,350.00.
B)$450.00.
C)$1,012.50.
D)$337.50.
E)$37.50.

Question

Quizplus · Accepted Answer

The annual insurance expense is calculated by dividing the total premium by the number of years the policy covers. $1,350 / 3 years = $450 per year. Since the policy starts on April 1, only 9 months of the insurance expense will be reported in the first year. Therefore, $450 * 9/12 = $337.50.

On April 1,a Company Paid the $1,350 Premium on a Three-Year