Berts Bungie Jumping Inc paid 650000 cash for casualty insur

Bert\'s Bungie Jumping, Inc. paid $650,000 cash for casualty insurance during the year 2015. If the income statement for the year reports insurance expense of $620,000, then

Bert\'s prepaid insurance decreased $30,000

Bert\'s cash account balance decreased $30,000

Bert\'s prepaid insurance increased $30,000

Bert\'s prepaid insurance was $30,000 at year-end

Solution

Since $650,000 cash has been paid for the year 2015 but the insurance expense for the period is only $620,000.

Hence the balance ($650,000-$620,000)=$30,000 would be the prepaid insurance for the period which would be shown in the \'asset\' section under the balance sheet.

Hence the prepaid insurance increased by $30000 .

Hence the correct option is C.