The direct method cash flow statement reported $67,030 in payments for insurance during the year.The prepaid insurance account had beginning and ending balances of $13,540 and $11,780,respectively,for the same period.The amount of insurance expense reported on the income statement for the same year was:

Question

Quizplus · Accepted Answer

The insurance expense can be calculated by adding the payments for insurance to the decrease in prepaid insurance, or subtracting any increase. Here, the prepaid insurance decreased by $1,760 ($13,540 - $11,780). Therefore, the insurance expense is $67,030 (payments) + $1,760 (decrease in prepaid insurance) = $68,790.

The Direct Method Cash Flow Statement Reported $67,030 in Payments