On March 1, Year 1, Presco Enterprises paid $1,200 cash for an insurance policy that would provide protection for a one-year term. The company's fiscal year ends on December 31. Based on this information, the amount of insurance expense appearing on the Year 1 income statement would be

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The insurance policy provides protection for a one-year term. Presco Enterprises paid $1,200 for the policy on March 1, Year 1, which means that the policy will cover the period from March 1, Year 1, to February 28, Year 2. Since the company's fiscal year ends on December 31, Year 1, only 10 months of the policy will apply to Year 1. Therefore, the amount of insurance expense appearing on the Year 1 income statement will be 10/12 (or 5/6) of the total cost of the policy, which is $1,200. Thus, insurance expense on the Year 1 income statement will be $1,000.

On March 1, Year 1, Presco Enterprises Paid $1,200 Cash