Amir Designs purchased a one-year liability insurance policy on March 1st of this year for $7,200 and recorded it as a prepaid expense. Which of the following amounts would be recorded for insurance expense during the adjusting process at the end of Amir's first month of operations on March 31st?

Question

Quizplus · Accepted Answer

Since this is only the end of the first month of operations, we need to record a portion of the prepaid insurance as an expense. We must divide the $7,200 by 12 (the number of months in the policy's coverage period) to obtain the monthly insurance expense, which is $600.

Amir Designs Purchased a One-Year Liability Insurance Policy on March