17? 17. The following information relates to the West Company: Prepaid Insurance

Question

17?

17. The following information relates to the West Company: Prepaid Insurance, December 31, 2012, $100,000; Prepaid Insurance, December 31, 2013, $120,000; Insurance Expense for 2013, $500,000. What was the amount of cash West paid for insurance premiums during 2013? a. $720,000 b. $600,000 c. $480,000 d. $520,000 The cost of merchandise sold during the year was $50,000. Merchandise inventories were S12,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable were $6,000 and $5,000 at the beginning and end of the year, resnecti direct method of reporting cash fl 18.

Explanation / Answer

CALCULATION OF THE CASH PAID FOR INSURANCE PARTICULARS AMOUNT Insurance Expenses of the year 2013= $            5,00,000 Add: Closing balance of Prepaid insurance for December 31, 2013 $            1,20,000 Less: Opening balance of Prepaid insurance of 2013 or Closing balance of Prepaid insurance of December 31, 2012 $            1,00,000 Total Cash paid during the year 2013 $            5,20,000 Answer = Option D = $ 520,000

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