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On January 1, DogMart Company purchased a two-year liability insurance policy for $32400 cash. The purchase was recorded to Prepaid Insurance. How much would be the January 31 amount recorded to expense
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On January 1, DogMart Company purchased a two-year liability insurance policy for $32400 cash. The purchase was recorded to Prepaid Insurance. How much would be the January 31 amount recorded to expense (use two decimals)?

User Cofiem
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1 Answer

5 votes

Answer: $1,350

Step-by-step explanation:

The insurance is for 2 years but has to be apportioned monthly on account of the Accrual basis in Accounting where expenses will only be recognized when they are incurred.

The expense to be recorded for the first month will therefore be:

= 32,400 / 24 months

= $1,350

User Nick Gallimore
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3.3k points
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