On July 1,Singh Company paid 6 months' insurance in advance.The policy covers the period of July 1 through December 31.The total payment was $5,400.At the time of the payment,the company set up the Prepaid Insurance account for $5,400.What is the balance in the Prepaid Insurance account on August 31?

Question

Quizplus · Accepted Answer

By August 31, two months of the insurance policy have been used (July and August), leaving four months remaining. The monthly insurance cost is $5,400 divided by 6 months = $900 per month. For four months remaining, the balance is 4 months * $900 = $3,600.

On July 1,Singh Company Paid 6 Months' Insurance in Advance