Final answer:
The insurance expense for Coolwear, Inc. in 2021 is calculated by adding the initial prepaid insurance balance and the insurance payments made during the year, then subtracting the prepaid insurance balance at the end of the year. The final answer is c. $101,400.
Step-by-step explanation:
To calculate the insurance expense for Coolwear, Inc., we must consider the changes in the prepaid insurance account and the amounts paid for insurance during 2021. We start with the prepaid insurance balance at the beginning of the year, which was $54,400. $92,000 was paid for insurance throughout the year, resulting in these payments being initially added to the prepaid insurance asset. At the end of the year, the balance in the prepaid insurance account was $45,000 after adjusting entries were made. The insurance expense for the year is the sum of the initial prepaid insurance and the payments made during the year minus the ending prepaid insurance balance.
Insurance expense = Beginning Prepaid Insurance + Payments for Insurance - Ending Prepaid Insurance
Thus, the insurance expense for Coolwear, Inc. for 2021 is:
Insurance expense = $54,400 + $92,000 - $45,000 = $101,400
The correct option is c. $101,400.