Question

On July 1, 20X3, Roxy Co. obtained fire insurance for a three-year period at an annual premium of $72,000 payable on July 1 of each year. The first premium payment was made July 1, 20X3. On October 1, 20X3, Roxy paid $24,000 for real estate taxes to cover the period ending September 30, 20X4. This prepayment was made to obtain a discount. In its December 31, 20X3, Balance Sheet, Roxy should report prepaid expenses of:

Answer 1

Answer:

$54,000

Explanation:

Calculation for What Roxy should report prepaid expenses In its December 31, 20X3, Balance Sheet,

Fire insurance premium (Unexpired) $36,000

($72,000*1/2)

Add Real estate tax prepayment (Unexpired) $18,000

($24,000*9/12)

December 31, 20X3 Prepaid expenses $54,000

($36,000+$18,000)

Therefore In its December 31, 20X3, Balance Sheet, Roxy should report prepaid expenses of:$54,000