Question

Campbell County uses the consumption method to record all inventories and prepayments. The County has a 3/31 fiscal year-end. On April 1, 2015, the county purchased a two-year insurance policy at a total cost of $400,000, paying for the policy out of the general fund. In the fund financial statements, the amount of insurance expenditures for the fiscal year ended 3/31/2016 would be

A. $400,000.
B. $300,000.
C. $200,000.
D. $100,000.

Answer 1

correct option is C. $200,000.

Step-by-step explanation:

given data

policy total cost = $400,000

time period = 2 year

solution

prepaid Insurance Premium for 2 years = $400,000

so

Insurance Premium for 1 year will be

Insurance Premium for 1 year = Insurance Premium for 2 years ÷ 2 ............1

Insurance Premium for 1 year =
`(400,000)/(2)`

Insurance Premium for 1 year = $200,000

so that insurance expenditure for the fiscal year ended 3/31/2016 will be $200,000

correct option is C. $200,000.