San Gabriel Company paid 6 months' insurance in advance, covering the period of July1 to December 31.The total payment was $5,400.At the time of the payment, the entire amount was used to increase the balance in the Prepaid Insurance account.The balance in the Prepaid Insurance account as of September 30 is_____.
A)$-0-
B)$2,700
C)$1,800
D)$3,600

Question

Quizplus · Accepted Answer

The insurance coverage period is from July 1 to December 31, which is a total of 6 months. As of September 30, only 3 months have passed. Therefore, the amount used up for insurance coverage is only half of the total payment, which is $2,700. Thus, the balance in the Prepaid Insurance account as of September 30 is also $2,700.

San Gabriel Company Paid 6 Months' Insurance in Advance, Covering