Question

The correct amount of prepaid insurance shown on a company's December 31, 2018, balance sheet was $900. On July 1, 2019, the company paid an additional insurance premium of $600. In the December 31, 2019, balance sheet, the amount of prepaid insurance was correctly shown as $500. The amount of insurance expense that should appear in the company's 2019 income statement is:

Answer 1

Answer:

The amount of insurance expense that should appear in the company's 2019 income statement is $1,000

Explanation:

The computation of the insurance expense is shown below:

= Beginning balance of prepaid expense + Additional insurance premium - ending balance of prepaid expenses

= $900 + $600 - $500

= $1,000

For computing the accurate value we added the opening balance of prepaid expenses, additional premium and deducted the ending balance of the prepaid expenses