Question

Widget Makers LLC started business January, 01, 2010. They paid a $6,000 premium for insurance coverage on their inventory. The coverage expires June 01, 2010. At this time they renew for the remainder of the year by paying an additional premium of $7,700. What is the quarterly insurance expense that Widget Makers should report for the period ending June 30,2010.

Answer 1

$3,500

Step-by-step explanation:

The quarterly insurance expense to report for the period ending June 30 2010 comprises of two months payment from the first payment and one month portion of the second payment as computed thus:

Insurance for April to May=$6,000*2/5=$2400

Insurance for June=$7,700*1/7=$1100

insurance expense for June=$2,400+$1,100=$3,500

Note that the first payment covers first 5 months while the second one covers the last 7 months