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ysjd.patel
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Regular

Joined: 12 Jan 2009
Location: United States
Online Status: Offline
Posts: 179

Posted: 02 May 2010 at 02:37 \| IP Logged

On July 1, 1990, Roxy Co. obtained fire insurance for a 3-year period at an annual premium of $72,000

payable on July 1 of each year. The first premium payment was made July 1, 1990. On October 1,1990,

Roxy paid $24,000 for real estate taxes to cover the period ending September 30, 1991. This

prepayment was made to obtain a discount. In its December 31, 1990, balance sheet, Roxy should

report prepaid expenses of:

a. $60,000

b. $54,000

c. $48,000

d. $36,000

Can anyone explain me how?

divyagovil1
Major Contributor

Joined: 30 Jan 2009
Location: India
Online Status: Offline
Posts: 1456

Posted: 02 May 2010 at 02:52 \| IP Logged

Fire insurance premium $72,000

less. Insurance expense from

7/1/90 to 12/31/90

72,000*6/12 36,000

prepaid insurance 36,000

Real estate taxes 24,000

Less. Tax expense from

10/1/90 to 12/31/90

24,000*3/12 6,000

Prepaid property taxes 18,000

Total prepaid expenses, 12/31/90 54,000

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ysjd.patel
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Joined: 12 Jan 2009
Location: United States
Online Status: Offline
Posts: 179

Posted: 02 May 2010 at 12:55 \| IP Logged

thanx divya...really appreciate !!!

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