Final answer:
The insurance expense on the annual income statement for the first year ended December 31, given a one-year policy starting on July 1 with a $3,360 premium, is $1,680, calculated by prorating the premium for the 6 months of coverage in that fiscal year.
Step-by-step explanation:
To calculate the insurance expense on the annual income statement for the first year ended December 31 for a policy that began on July 1 and whose premium was $3,360, we prorate the expense for the number of months the policy was in effect during the fiscal year. Since the policy covers a full year and the first fiscal year only spans from July through December, we account for 6 months of the policy period within this fiscal year. Therefore, the insurance expense for the income statement would be calculated as follows:
Annual Premium: $3,360
Months in the policy period for the fiscal year: 6/12
Expense for the income statement: $3,360 * (6/12) = $1,680
Thus, the insurance expense recorded on the annual income statement for the first year ended December 31 will be $1,680.