Question

a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31

Answer 1

$337.50

Step-by-step explanation:

Given that

Three year insurance policy = $1,350

So, the insurance expense on an annual basis would be

= Three year insurance policy ÷ number of years

= $1,350 ÷ 3 years

= $450

For April 1 to December 31, the months is 9 months

So, for 9 months, it would be

= $450 × 9 months ÷ 12 months

= $337.50

We assume the premium is paid on April 1