Question

Item 2 item 2 when castle corporation pays insurance premiums, the transaction is recorded as a debit to prepaid insurance. additional information for the year ended december 31 is as follows: prepaid insurance at january 1 $50,500 insurance expense recognized during the year 218,350 prepaid insurance at december 31 61,650 what was the total amount of cash paid by castle for insurance premiums during the year

Answer 1

Calculation of total amount of cash paid by castle for insurance premiums during the year;

Cash paid for insurance premiums can be calculated using the following formula:

Cash paid for insurance premiums = Ending prepaid Insurance + Insurance Expense recognized- Beginning prepaid insurance

Cash paid for insurance premiums = 61,650+218,350-50,500 = $229,500

Hence, the total amount of cash paid by castle for insurance premiums during the year is $229,500