ABC opened for business on January 1, 2018, and paid for two insurance policies effective that date. The liability policy was $5

Question

3 years ago

7

ABC opened for business on January 1, 2018, and paid for two insurance policies effective that date. The liability policy was $5

4,000 for 18 months, and the crop damage policy was $18,000 for a two-year term. What was the balance in ABC's Prepaid Insurance account as of December 31, 2018

Business

1 answer:

Whitepunk [10] · Answer 1 · 2022-09-02T07:14:48+03:00

Answer:

The balance in ABC's Prepaid insurance-account as on Dec 31, 2018 is <em>$27,000</em>

Explanation:

Liability policy = ($54,000 / 18) × 6 months

Liability policy = $18,000

Crop damage policy = ($18,000 x 12 / 24)

Crop damage policy = $9,000

ABC's Prepaid insurance-account balance as on Dec 31, 2018 = $27,000

Thus,

Total Liability insurance period = 18

Now,

Expired period period - 12 months ( Jan 1, 2016 to Dec 31, 2016 )

Unexpired period = (18 - 12) months = 6 months