Final answer:
Justin can indeed only deduct the insurance premium amount that corresponds to the current year, which is $2,250 for 9 months out of a 24-month period from a $6,000 premium payment. This reflects the principle of matching expenses with the period's revenues.
Step-by-step explanation:
The statement that Justin may only deduct the portion of the insurance premium pertaining to this year is true. This accounting practice aligns with the principle that expenses should be matched with the revenues of the period to which they relate. Hence, if Justin's insurance coverage lasts longer than 12 months, he should allocate the premium costs accordingly. In this case, if Justin can deduct $2,250 of the $6,000 paid for insurance because the coverage pertains to 9 months of the current year, it means he is correctly apportioning the cost over the 24-month period the payment covers.
Using the information provided as a reference, we understand that insurance companies collect premiums from multiple individuals to pool the risk and cover the costs associated with the risks insured against. For example, if each of the 100 drivers pays a $1,860 premium each year, the insurance company will collect $186,000, which is needed to cover the costs of the accidents that occur among these drivers.