A Seffner contractor prepaid $58,800 for a 12-month insurance policy. After 5 months have expired, what prepaid insurance asset remains?
Correct Answer
D) $34,300
The remaining prepaid asset is the unexpired portion of the policy.
Why This Is the Correct Answer
The remaining prepaid asset is the unexpired portion of the policy.
Why the Other Options Are Wrong
Option A: $24,500
$24,500 is below the supported result for prepaid insurance balance; it likely uses the wrong base, period, or account bucket.
Option B: $4,900
$4,900 is below the supported result for prepaid insurance balance; it likely uses the wrong base, period, or account bucket.
Option C: $53,900
$53,900 is above the supported result for prepaid insurance balance; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Prepaid Insurance drawer for Accountant Prepares: label remaining before counting dollars.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Adjusting Entries, Prepaid Expenses; use the job ledger figures in the stem and recompute the same accounting measure.
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