Olsen Company paid or collected during 2014 the following items: The following balances have been excerpted from Olsen's balance sheets: The insurance expense on the income statement for 2014 was
A) $20,400.
B) $25,200.
C) $26,400.
D) $31,200.

Question

Olsen Company paid or collected during 2014 the following items:  The following balances have been excerpted from Olsen's balance sheets:  The insurance expense on the income statement for 2014 was
A) $20,400. 
B) $25,200. 
C) $26,400. 
D) $31,200.

Quizplus · Accepted Answer

To find the insurance expense on the income statement for 2014 we need to use the formula: Insurance expense = Beginning balance + Premiums paid - Ending balance. 
So, Insurance expense = $1,600 + $26,000 - $4,800 = $26,800. 
However, the question asks for items "paid or collected" during 2014 and the ending balance represents an amount that is still owed. Therefore, we need to subtract the amount still owed from the calculated expense: $26,800 - $400 = $26,400. 
Thus, the correct answer is C) $26,400.

Olsen Company Paid or Collected During 2014 the Following Items