Small tools costing $18,000 are prepaid and expensed evenly over 24 months. After 7 months, what unexpired asset balance remains?
Correct Answer
C) $12,750
Monthly expense is $750. Seven months have expired, leaving $12,750 unexpired.
Why This Is the Correct Answer
Monthly expense is $750. Seven months have expired, leaving $12,750 unexpired.
Why the Other Options Are Wrong
Option A: $11,250
$11,250 is below the supported result for prepaid asset balance; it likely uses the wrong base, period, or account bucket.
Option B: $12,000
$12,000 is below the supported result for prepaid asset balance; it likely uses the wrong base, period, or account bucket.
Option D: $13,500
$13,500 is above the supported result for prepaid asset balance; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Checks Amortization money test: bucket before math for prepaid asset balance.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Recording Before the Event, Prepaid Expenses; use the job ledger figures in the stem and recompute the same accounting measure.
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