On 1 May 2016,A Ltd pays $9600 for a one-year fire insurance policy that expires on 30 April 2017.Which of the following will appear on A Ltd's balance sheet at 30 June 2016?

Question

Quizplus · Accepted Answer

The correct answer is B) Prepaid insurance $8000. This is because, by 30 June 2016, two months of the insurance policy have elapsed (May and June), leaving ten months of coverage. The cost of the insurance policy is $9600 for 12 months, so each month costs $800 ($9600/12 months). Therefore, for ten remaining months, the prepaid insurance amount is $8000 ($800 x 10 months).

On 1 May 2016,A Ltd Pays $9600 for a One-Year