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21 June, 17:17

Eve's Apples opened for business on January 1, 2021, and paid for two insurance policies effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What was the balance in Eve's Prepaid Insurance account as of December 31, 2021?

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  1. 21 June, 20:58
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    The balance in Eve's prepaid insurance account as of December 2021 is $18000 as shown below.

    Explanation:

    The balance of prepaid insurance would be the balance left after 12 months expense has taken from both amounts

    Liability policy $36000*6/18=$12000

    Crop damage policy $12000*12/24=$6000

    Balance of prepaid insurance $18,000

    The balance of $18000 would be left in the prepaid insurance account, whereas the balance damage crop policy account would be enough for the coming year, there is a need for 6 months insurance policy payment in respect of liability policy in the year 2022
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