Question

On April 1, 2009, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2009?A. $1,350.B. $450.C. $1,012.50.D. $337.50.E. $37.50.

Answer 1

Answer:

D. $337.50.

Explanation:

The computation of the insurance expense for the year ended would be shown below:

= Premium amount - nine-month premium

where,

Premium amount is $1,350

And, the nine-month premium would be

= Premium amount × number of months ÷ (total number of months in a year)

= $1,350 × (9 months ÷ 12 months)

= $1,012.50

The nine-month is calculated from the April 1 to December 31

Now put these values to the above formula  

So, the value would equal to

= $1,350 - $1,012.50

= $337.50