Pickering Company's prepaid insurance was $8,000 at December 31, 2017, and $10,000 at December 31, 2018. Pickering reported insurance expense of $15,000 on the 2018 income statement. What amount would be reported in the statement of cash flows as insurance paid using the direct method?

Question

Quizplus · Accepted Answer

$\begin{array}{ll}
\text { Ending balance, Prepaid insurance } & \$ \quad 10,000 \
\text { Plus Insurance expense } & 15,000 \
\text { Minus Beginning balance, Prepaid insurance } & \underline{(8,000)} \
\text { = Cash paid for insurance } & \underline{\$ 17,000}
\end{array}$ Irsurarace expense$~~~~~~~~~~~15,000$
Prepaid insurarnce$~~~~~~~~~~~2,000$
Cash$~~~~~~~~~~~~~~~~~~~~~~~~~~~~~\colorbox{white}{17,000}$

Pickering Company's Prepaid Insurance Was $8,000 at December 31, 2017