Question

The prepaid insurance account had a beginning balance of $7,270 and was debited for $640 for premiums paid during the year. What is the ending balance of the prepaid insurance account?

a. $6,630
b. $7,910
c. $7,910
d. $6,630

Answer 1

The ending balance of the prepaid insurance account is calculated by deducting the amount of premiums paid during the year from the beginning balance. In this case, $640 is subtracted from $7,270, resulting in an ending balance of $6,630.

Step-by-step explanation:

The question involves calculating the ending balance of a prepaid insurance account. Starting with a beginning balance of $7,270, if you debit the account by $640 for the premiums paid during the year, you will subtract $640 from the $7,270. To find the ending balance, perform the following calculation:

• $7,270 (beginning balance) - $640 (premiums paid) = $6,630 (ending balance)

Therefore, the ending balance of the prepaid insurance account would be $6,630.