Question

In its Prepaid Insurance account, Ngo Company reported a balance of $5,200 on January 1, and...

In its Prepaid Insurance account, Ngo Company reported a balance of $5,200 on January 1, and $8,000 on December 31. The company also reported Insurance Expense of $4,000. What was the amount of cash outflow associated with Insurance during the year?

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Answer #1

Opening balance on January 1: $5,200

Closing balance on December 31: $8,000

Reported Insurance Expense:  $4,000

Calculation of amount of cash outflow on Insurance during the year:

Cash outflow on Insurance: Reported Insurance expense + Closing balance - Opening balance

Cash outflow on Insurance: $ 4,000 + $ 8,000 - $ 5,200

Cash outflow on Insurance: $ 6,800

Prepaid Insurace Account

Date Particular Amount Date Particular Amount
January,1 To Opening Balance $ 5,200 By Insurance Expence $ 4,000

To cash A/c

( Balancing figure)

 $ 6,800 December,31 To Closing balance $ 8,000
TOTAL $12,000 TOTAL $ 2,000
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