Niagara Corporation purchased a one-year insurance policy in January 2011 for $54,000.The insurance policy is in effect from March 2011 through February 2012.If the company neglects to make the proper year-end adjustment for the expired insurance

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The insurance policy covers 12 months, and by the end of December 2011, 10 months have expired. The expense for these 10 months is $45,000 ($54,000/12 months * 10 months). If no adjustment is made, expenses are understated, leading to overstated net income and assets by $45,000.

Niagara Corporation Purchased a One-Year Insurance Policy in January 2011