Question

Under Hart Company’s accounting system, all insurance premiums paid are debited to Prepaid insurance. For interim financial reports, Hart makes monthly estimated charges to Insurance expense with credits to Prepaid insurance. Additional information for the year ended December 31, 2017, follows:

Prepaid insurance at december 31, 2016 $210,000
Charges to insurance exppence during 2017, including
a year-end adjustment of $35,000 875,000
Prepaid insurance at December 31, 2017 245,000

What was the total amount of insurance premiums Hart paid during 2017?

Answer 1

$910,000

Step-by-step explanation:

The computation of the total amount of insurance premiums is shown below:

= Insurance expense + Prepaid insurance at December 31, 2017 - Prepaid insurance at December 31, 2016

= $875,000 + $245,000 - $210,000

= $910,000

We simply applied the above formula so that the total amount of insurance premiums could come and ignored the year end adjustment given in the question