Question

Eve's Apples opened business on January 1, 2011, and paid for two insurance policies effective that date. The liability policy was $36,000 for eighteen months, and the crop damage policy was $12,000 for a two-year term. What was the balance in Eve's prepaid insurance as of December 31, 2011

Answer 1

the balance in the prepaid insurance is $6,000

Step-by-step explanation:

The computation of the balance in the prepaid insurance is shown below:

= Liability policy - crop damage policy

= ($36,000 ÷ 18 months × 6 months) - ($12,000 ÷ 24 months × 12 months)

= $12,000 - $6,000

= $6,000

Hence, the balance in the prepaid insurance is $6,000

We simply applied the above formula so that the correct value could come

And, the same is to be considered