A county uses the consumption method in accounting for insurance premium prepayments. At the beginning of the fiscal year, the county paid a $24,000 insurance premium to cover the current year and the subsequent fiscal year. At the end of the current year, the county will report in its General Fund

Question

Quizplus · Accepted Answer

Since the county uses the consumption method, only the portion of the premium that applies to the current year should be recorded as an expenditure. Therefore, the county will report expenditures of $12,000 for the current year and a $12,000 prepaid asset for the subsequent year.

A County Uses the Consumption Method in Accounting for Insurance