On April 1, Year 1, Seaside Bookstore bought an insurance policy costing $48,000 that would insure the retail building for two years against fire loss.What asset account and what amount are recorded on the balance sheet at December 31, Year 1?
A)Prepaid Insurance, $30,000
B)Insurance Expense, $30,000
C)Prepaid Insurance, $18,000
D)Insurance Expense, $18,000
E)Insurance Expense, $9,000

Question

Quizplus · Accepted Answer

The insurance policy covers two years, so the annual cost is $24,000. By December 31, Year 1, nine months have passed, so $18,000 is used, leaving $30,000 as Prepaid Insurance.

On April 1, Year 1, Seaside Bookstore Bought an Insurance