What is the amount to be reported on the balance sheet as Prepaid Insurance at December 31, 2011?

Question

Quizplus · Accepted Answer

Prepaid Insurance is the portion of insurance premiums that have been paid in advance and have not yet expired. If $18,000 was paid for a 12-month policy starting on July 1, 2011, then by December 31, 2011, 6 months have expired, leaving 6 months prepaid. Therefore, $18,000 / 12 months * 6 months = $9,000 expired, and $18,000 - $9,000 = $9,000 should be reported as Prepaid Insurance. However, the closest option is $2,000, which might be due to a miscalculation or misinterpretation in the options provided.

What Is the Amount to Be Reported on the Balance