Chapter 7: Self Employment // Section Questions: Prepaid Expenses

7. Prepaid Expenses. (Obj. 1) A sole proprietor who operates a warehouse buys insurance for his building and equipment in three-year increments to get a good insurance premium rate, The insurance policy was acquired on October 1, 2020, for $4,800 and will be in effect until September 30, 2023. The premium on this policy was paid on July 1, 2020. a. Compute the amount of insurance premium that can be deducted on Schedule C in 2020-2023, assuming the taxpayer uses the cash method of accounting. b. Same as Part a., except that the taxpayer uses the accrual method