The Kwang Corp. paid $72,000 on July 1, Year 1, for a four-year property insurance policy.

A. At the time it makes the $72,000 payment, how does this payment affect the accounting equation? What assets, liabilities, or expenses are affected?

B. Each month, as Kwang records some insurance expense, how is the accounting equation affected? What assets, liabilities, or expenses are affected?

C. What amount of this payment should it allocate to expense in:

a. The last six months of Year 1?

b. Year 2?

c. Year 3?

d. The first six months of Year 4?