Clean Sweep,Inc.paid $7,200 on May 1,2011 for 12 months' insurance coverage starting May 1.How much insurance expense should appear on the company's income statement for the year ended December 31,2011?

Question

Quizplus · Accepted Answer

Since the insurance coverage started on May 1, 2011, and ended on April 30, 2012, the coverage for the year ended on December 31, 2011, would be for eight months (May-December). Therefore, the insurance expense for the year ended December 31, 2011, would be $4,800 (8/12 x $7,200).