Apex is on the cash basis of accounting and prepaid a 1 year insurance policy in...
Apex is on the cash basis of accounting and prepaid a 1 year insurance policy in 2019. On 11/1/2019 it pays $ 36,000 on a policy that runs from 2/1/2020 – 1/31/2021. How much will Apex deduct in 2019 and 2020 and 2021?
Homework Answers
Answer:
Deduction in 2019:$36,000
Deduction in 2020:$0
Deduction in 2021:$0
Explanation:
The cash basis of accounting recognizes revenues when cash is received, and expenses when they are paid. As such, this cost of $36,000 will be recognised completely in 2019 and nil in the later years.
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