Question

The correct amount of prepaid insurance shown on a company's December 31, 2011, balance sheet was $900. On July 1, 2012, the company paid an additional insurance premium of $600. In the December 31, 2012, balance sheet, the amount of prepaid insurance was correctly shown as $500. The amount of insurance expense that should appear in the company's 2012 income statement is:

Answer 1

The insurance expense for 2012 would be $200.

Step-by-step explanation:

The amount of insurance expense that should appear in the company's 2012 income statement can be calculated by subtracting the change in prepaid insurance from the insurance premium paid during the year. In this case, the company paid an additional premium of $600 on July 1, 2012, and the prepaid insurance decreased by $400 ($900 - $500) by December 31, 2012. Therefore, the insurance expense for 2012 would be $600 - $400 = $200.