Homework Answers
Insurance policy beginning date is October 01, 2010. It is a two year insurance policy. The closing date or the ending date of the insurance policy is 30th September 2012.
For 2010 [ 1st January 2010 to 31st December 2010]
Insurance policy exhausted for 3 months in 2010 [ Oct, Nov and Dec ]
Insurance expenses = $ 4,320 X 3/24 = $ 540
Prepaid insurance on 31st December 2010 = $ 4,320 - $ 540 = $ 3,780
For 2011 [ 1st January 2011 to 31st December 2011]
Insurance policy exhausted for 12 months in 2011 ( from January to December)
Insurance expenses = $ 4,320 X 12/ 24 = $ 2,160
Prepaid insurance on 31st December 2011 = $ 3,780 - $ 2,160 = $ 1,620
For 2012 [ 1st January 2012 to 31st December 2012]
Insurance policy exhausted for 9 months in 2012 ( from January to September)
Insurance expenses = $ 4,320 X 9/24 = $ 1,620
Prepaid insurance on 31st December 2012 = $ 1,620 - $ 1,620 = $ 0 or nil.
Summary of insurance expenses and prepaid insurance
| Year | Insurance expense | Prepaid insurance on 31st December |
| 2010 | $ 540 | $ 3,780 |
| 2011 | $ 2,160 | $ 1,620 |
| 2012 | $ 1,620 | $ 0 |
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