On January 1, 2018, the Prepaid Insurance account of Dogwood, Inc. had a beginning balance of $2,700. Three months of insurance premiums remain in this beginning balance. On February 21, 2018, the company paid an annual insurance premium in the amount of $4,300 for the period beginning March 1. On February 28, 2018, the balance in Prepaid Insurance is $1,800.

Question

Quizplus · Accepted Answer

The balance in Prepaid Insurance on February 28, 2018, should be $6,000. This is because the beginning balance of $2,700 would be reduced by one month's worth of insurance ($2,700 / 3 months = $900 per month), leaving $1,800. Then, adding the annual premium paid on February 21, 2018, for $4,300, gives a total of $1,800 + $4,300 = $6,100. However, considering the question might have a typo and meant to imply the calculation before the new premium is fully accounted for, the intended calculation would simply add the remaining beginning balance ($1,800 after one month's reduction) to the new premium, which indeed results in $6,100, not $1,800.

On January 1, 2018, the Prepaid Insurance Account of Dogwood