On June 30, a company purchased 1 year of insurance coverage which started immediately, paying cash...

On June 30, a company purchased 1 year of insurance coverage which started immediately, paying cash of $2,400. Choose the true statement.

On the Balance Sheet at the end of the year, prepaid insurance will be a non-current asset.

On June 30, cash would be debited for $2,400.

On the Income Statement for the year, insurance expense will be $1,200.

On the Balance Sheet at the end of the year, prepaid insurance will be $2,400.

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Answer

On June 30, a company purchased 1 year of insurance coverage which started immediately, paying cash of $2,400. Choose the true statement.

Correct Statement is Option #3:
On the Income Statement for the year, insurance expense will be $1,200.

This is because Income Statement will contain the Insurance expense for the period expired since June 30.
Period from 30 June to 31 Dec = 6 months.
6 months Insurance expense = $ 2400 x 6/12 = $ 1,200

ekkarill92 answered 2 years ago

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