Eve's Apples opened business on January 1, 2013, and paid for two insurance policies effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What is the balance in Eve's prepaid insurance as of December 31, 2013?
A)$9,000.
B)$18,000.
C)$30,000.
D)$48,000.

Question

Quizplus · Accepted Answer

The liability policy covers 18 months, and by December 31, 2013, 12 months have gone by, so the remaining prepaid insurance for liability is (18-12)/18*36,000 = $12,000. 
The crop damage policy covers two years, so by December 31, 2013, only one year has gone by, so the remaining prepaid insurance for crop damage is (2-1)/2*12,000 = $6,000. 
Thus, the total balance in prepaid insurance is 12,000 + 6,000 = $18,000.

Eve's Apples Opened Business on January 1, 2013, and Paid