Question

Given the following 2023 information for the Pinto Company: Increase in Wages Payable $ 400 Operating Expenses $5,000 Total Cash paid for expenses $4,100 12/31/23 Prepaid Insurance $1,200 Operating Expenses and cash paid for expenses consisted of amounts for insurance and wages only. The 1/1/23 balance of Prepaid Insurance was:

Answer 1

Answer: $1,800

Explanation:

Operating expenses comprise of only insurance and wages.

The total operating expenses were $5,000.

Out of that $5,000, $400 was for an increase in wages, $4,000 was paid off.

The rest is therefore for insurance.

= 5,000 - 400 - 4,000

= $600

If $600 is the insurance payment during the year then on 1/1/23, the balance was the current balance plus the payment;

= 1,200 + 600

= $1,800