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An analysis of Thrift Corp.’s unadjusted prepaid expense account at December 31, Year 2, revealed the following:
An opening balance of $1,500 for Thrift’s comprehensive insurance policy. Thrift had paid an annual premium of $3,000 on July 1, Year 1.
A $3,200 annual insurance premium payment made July 1, Year 2.
A $2,000 advance rental payment for a warehouse Thrift leased for one year beginning January 1, Year 3.
In its December 31, Year 2 balance sheet, what amount should Thrift report as prepaid expenses?
Insurance, $3,200 x 1/2 $ 1,600
Rental prepayment 2,000
ANSWER: $ 3,600
My question is: Why did they not include the $1500 in the prepaid annual premium of $3000?
*What makes this insurance not accruable and the other insurance premium accruable?*
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