CIMA BA3 · Chapter 9 · Question 3 of 10
On 1 October 20X4 a business paid an insurance premium of $2,400 for the year to 30 September 20X5. Its year end is 31 December 20X4. What is the prepayment at 31 December 20X4?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $1,800
Explanation
Three months (October to December) relate to 20X4, giving an expense of $600. The remaining nine months relate to next year, so the prepayment = $2,400 x 9/12 = $1,800.
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