On August 1, 2019, a firm purchased a 1-year insurance policy for $3,600 and paid the full premium in advance. The insurance expense associated with this policy for the year ending December 31, 2019, is

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The insurance expense for the year ending December 31, 2019, is calculated based on the portion of the policy that applies to that year. Since the policy covers a 1-year period from August 1, 2019, to July 31, 2020, only 5 months of the policy apply to 2019 (August through December). The monthly cost is $3,600 / 12 = $300. Therefore, the expense for 2019 is $300 * 5 = $1,500.

On August 1, 2019, a Firm Purchased a 1-Year Insurance