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 closing date is December 31.Based on this information,the amount of insurance expense appearing on the Year 1 income statement would be

Question

Quizplus · Accepted Answer

Cost per month = $1,200 total ÷ 12 months = $100 per month
As of December 31, Year 1:
Amount used = $100 per month × 10 months = $1,000 insurance expense
Future benefit = $100 per month × 2 months = $200 prepaid insurance

On March 1,Year 1,Presco Enterprises Paid $1,200 Cash for an Insurance