92) Sure Safe, Inc. had prepaid insurance of $1,600 on January 1, 2011 from a month insurance policy purchased on March 1, 2010 for $9,600. On March 1, 2011, the company bought more insurance coverage by paying $10,800 for a new one-year policy. The company’s year ends on December 31, 2011 and all adjustments for the whole year are made on that date. What amount should appear on the December 31, 2011 balance sheet as prepaid insurance? What amount of insurance expense should be reported on the income statement for the year ended December 31, 2011?
93) What is book or carrying value?
94) What is depreciation?
95) Explain the matching principle.
96) Toys for Boys, Inc. had prepaid insurance of $7,200 on January 1, 2011. This amount relates to a month insurance policy purchased on July 1, 2010 for $14,400. On July 1, 2011, Toys for Boys purchased more insurance coverage by paying $9,000 for a new one-year policy. The company’s year ends on December 31, 2011 and all adjustments for the whole year are made on that date so that financial statements can be prepared. What amount should appear on the December 31, 2011 balance sheet as prepaid insurance? What amount should be reported on the year ended December 31, 2011 income statement as insurance expense?