The correct amount of prepaid insurance shown on a companys December 31, 2011, balance sheet was $600.

Question:

The correct amount of prepaid insurance shown on a company’s December 31, 2011, balance sheet was $600. On July 1, 2012, the company paid an additional insurance premium of $1,440, recorded as more prepaid insurance. On the December 31, 2012, balance sheet, the amount of prepaid insurance was correctly shown as $720. What amount of insurance expense would appear on the company’s income statement for the year ended December 31, 2012? Is the adjustment to record the insurance expense related to an accrual or a deferral?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...