On January 1,2014,Prepaid Insurance of Maywood Inc.had a beginning balance of $1,200.On February 1,2014,the company paid an annual insurance premium in the amount of $4,800 for the period beginning April 1.On February 28,2014,the balance in Prepaid Insurance is $2,000.The prepaid expense was initially recorded as an asset.

Question

Quizplus · Accepted Answer

The balance on February 28, 2014, should be $6,000 ($1,200 beginning balance + $4,800 payment), not $2,000, if no insurance expense has been recognized yet.