On March 1,20X9,Schmor Incorporated paid 6 months' insurance in advance,covering the period of March 1 to August 31,20X9.The total payment was $4,200.At the time of the payment,the entire amount was used to increase the balance in the Prepaid Insurance account.What will be the balance in the Prepaid Insurance account as of March 31,20X9?

Question

Quizplus · Accepted Answer

The total payment for 6 months is $4,200, so one month's insurance cost is $4,200 / 6 = $700. Since the insurance covers from March 1 to August 31, and we're looking at the balance as of March 31, one month (March) has passed. Therefore, $700 for March should be expensed, leaving $4,200 - $700 = $3,500 in the Prepaid Insurance account.

On March 1,20X9,Schmor Incorporated Paid 6 Months' Insurance in Advance,covering