Relevant account balances for Martinez Corporation are:
$\begin{array}{lrr}
&12/31/17&1/01/17\
\text { Accounts receivable } & \$ 18,000 & \$ 14,000 \
\text { Inventory } & 24,000 & 26,000 \
\text { Prepaid insurance } & 1,500 & 2,100 \
\text { Accounts payable } & 25,000 & 26,000
\end{array}$

$\underline{\text { Income information for } 2017}$
$\begin{array}{l}
\text { Revenue } &&\$120,000\
\text { Cost of goods sold } & \$ 60,000 \
\text { Insurance expense } & 6,000 \
\text { Operating expenses } & 18,000 \
\text { Depreciation } &\underline{ 10,000}&\underline{94,0000} \
\text { Net income }&&\underline{\$26,000}
\end{array}$

How much cash was paid for insurance during 2017?

Question

Relevant account balances for Martinez Corporation are:
$\begin{array}{lrr}
&12/31/17&1/01/17\
\text { Accounts receivable } & \$ 18,000 & \$ 14,000 \
\text { Inventory } & 24,000 & 26,000 \
\text { Prepaid insurance } & 1,500 & 2,100 \
\text { Accounts payable } & 25,000 & 26,000
\end{array}$

$\underline{\text { Income information for } 2017}$
$\begin{array}{l}
\text { Revenue } &&\$120,000\
\text { Cost of goods sold } & \$ 60,000 \
\text { Insurance expense } & 6,000 \
\text { Operating expenses } & 18,000 \
\text { Depreciation } &\underline{ 10,000}&\underline{94,0000} \
\text { Net income }&&\underline{\$26,000}
\end{array}$

How much cash was paid for insurance during 2017?

Quizplus · Accepted Answer

The cash paid for insurance is calculated by adjusting the insurance expense for the change in prepaid insurance. The insurance expense for the year is $6,000. The prepaid insurance decreased from $2,100 at the beginning of the year to $1,500 at the end of the year, indicating that $600 of the insurance expense was prepaid. Therefore, the actual cash paid for insurance is the insurance expense ($6,000) plus the decrease in prepaid insurance ($600), totaling $5,400.

Relevant Account Balances for Martinez Corporation Are Income information for 2017‾\underline{\text { Income information for } 2017} Income information for 2017​

Relevant Account Balances for Martinez Corporation Are $\underline{\text { Income information for } 2017}$