Answer:
$337.50
Explanation:
the premium on a three year policy = $1,350
premium per year = $1,350 / 3 = $450
premium per month = $450 / 12 = $37.50
Since the premium covered April to December, 9 months of insurance expense are accrued.
insurance expense for 9 months = $37.50 x 9 = $337.50
The journal entries should be:
April 1, purchase a 3 year insurance policy:
Dr Prepaid insurance 1,350
Cr Cash 1,350
December 31, accrued insurance expense:
Dr Insurance expense 337.50
Cr Prepaid insurance 337.50
