On January 1 2014 Ryan Company paid the premium on a fouryea

On January 1, 2014, Ryan Company paid the premium on a four-year insurance policy in the amount of $6,400. At that time, the full amount paid was recorded as prepaid insurance. After recording the adjusting entry for the insurance policy on December 31, 2014, what would be the balance in Ryan Company\'s prepaid insurance account? O $4,800 o $3,700 O $6,400 O $3,800

Solution

Answer is $ 4800

Calculation :

insurance policy period= 4 years

Insurance amount =$6400

So insurance premium amount per annum= $6400/4=$1600

Thus at end of 1 st year remaining balance in prepaid insurance account- 6400*3/4

=$4800