Question

In: Accounting

An Enterprise Fund that operates on a calendar year basis pays $18,000 for a three-year insurance...

An Enterprise Fund that operates on a calendar year basis pays $18,000 for a three-year insurance policy on January 1, 2008. In its financial statements for the year ended December 31, 2008, the Enterprise Fund should report:

a. an expense of $6,000; and an asset of $12,000

b. an expense of $18,000

c. an expense of $12,00; and an asset of $6,000

d. an asset of $18,000; and an expense of $6,000

Solutions

Expert Solution

Answer is A.

3-year Insurance Expense = $18,000

1-year Insurance Expense = $18,000 / 3
1-year Insurance Expense = $6,000

On December 31, 2008, Enterprise will record insurance expense of $6,000 and prepaid insurance of $12,000.

So, the Enterprise Fund should report an expense of $6,000 and an asset of $12,000

ekkarill92 answered 2 years ago
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