Bob's Signwriting Pty Ltd is a small business entity and has just paid $240,000, which represents the next 24 months of liability insurance to cover the business until 30 April 2022. How much of this prepaid expense can Bob's Signwriting Pty Ltd claim in the year ended 30 June 2020?

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Quizplus · Accepted Answer

The insurance covers 24 months until 30 April 2022, meaning it starts on 1 May 2020. The period from 1 May 2020 to 30 June 2020 is 2 months. Since the total cost is $240,000 for 24 months, the monthly cost is $240,000 / 24 = $10,000. Therefore, for 2 months (May and June 2020), the claimable amount is $10,000 x 2 = $20,000.

Bob's Signwriting Pty Ltd Is a Small Business Entity and Has