Bert's Bungie Jumping, Inc. paid $650,000 cash for casualty insurance during the year 2015. If the...

Bert's Bungie Jumping, Inc. paid $650,000 cash for casualty insurance during the year 2015. If the income statement for the year reports insurance expense of $620,000, then

Bert's prepaid insurance decreased $30,000

Bert's cash account balance decreased $30,000

Bert's prepaid insurance increased $30,000

Bert's prepaid insurance was $30,000 at year-end

Solutions

Expert Solution

Since $650,000 cash has been paid for the year 2015 but the insurance expense for the period is only $620,000.

Hence the balance ($650,000-$620,000)=$30,000 would be the prepaid insurance for the period which would be shown in the 'asset' section under the balance sheet.

Hence the prepaid insurance increased by $30000 .

Hence the correct option is C.

ekkarill92 answered 2 years ago

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