Question

On March 1, a business paid $4,920 for a 12-month liability insurance policy. On April 1, the business entered into a two-year rental contract for equipment at a total cost of $22,680. Determine the following amounts:

(a) Insurance expense for the month of March
$

(b) Balance in prepaid insurance as of March 31
$

(c) Equipment rent expense for the month of April
$

(d) Balance in prepaid equipment rental as of April 30

Answer 1

In Question:

Paid for insurance policy on March-1 for 12 months = $4,920. Hence one month expense = $410 (4920/12)

Rental contract for equipment for 2 years = $22,680. Hence one month expense = $945 (22680/24)

Answer to the question,

(a) - Insurance expense for the month of March = $410 ($4920/12).

(b) - Balance in prepaid insurance as of March 31 = $4,510 ($4920-$410)

(c) - Equipment rent expense for the month of April = $945 ($22680/24) (equipment contract for 2 years, which is 24 months).

(d) - Balance in prepaid equipment rental as of April 30 = $21,735 ($22680-$945)