A 40-month insurance policy was purchased for $2,100 on May 1. How much insurance will be expensed on December 31?

Question

Quizplus · Accepted Answer

The insurance policy is for 40 months, or 3 years and 4 months. From May 1 to December 31 (in the same year), there are 8 months.

To calculate the amount of insurance that will be expensed on December 31, we need to determine what proportion of the total policy period has elapsed.

8 months / 40 months = 1/5

So, 1/5 of the total cost of the policy will be expensed on December 31:

$2,100 / 5 = $420

Therefore, the correct answer is D, $420.

A 40-Month Insurance Policy Was Purchased for $2,100 on May