Amir Designs purchased a one-year liability insurance policy on March 1st of this year for $5,400 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

The adjusting entry for insurance expense would be calculated as follows:

Total cost of insurance policy / Number of months covered = Monthly insurance expense

$5,400 / 12 months = $450 per month

Since Amir has only been in operation for one month (March), the amount of insurance expense to be recorded during the adjusting process at the end of the month would be $450.

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