Question

Here is some data from Magnolia Company's balance sheet:

12/31/2020 Prepaid Insurance Balance $2,332
12/31/2019 Prepaid Insurance Balance $2,769
2020 Insurance Expense $1,105
How much cash was paid for insurance premiums in 2020? Round your answer to the nearest whole dollar. Don't use dollar signs when entering your answer.

Answer 1

The cash paid for insurance premiums in 2020 is $668.

Step-by-step explanation:

In order to determine the cash paid for insurance premiums in 2020, we need to consider the changes in the prepaid insurance balance. The formula to calculate the cash paid is:

Cash Paid for Insurance Premiums = Prepaid Insurance (End of Year) - Prepaid Insurance (Beginning of Year) + Insurance Expense

Using the given balance sheet data:

Cash Paid for Insurance Premiums = $2,332 - $2,769 + $1,105 = $668