X Company has several insurance policies covering different periods. On the Bala

Question

X Company has several insurance policies covering different periods. On the Balance Sheet, Prepaid Insurance at the beginning of the period was $24,669; Prepaid Insurance at the end of the period was $24,21. On the Income Statement, Insurance Expense was $34,469. Insurance premium payments during the period were $26,643 $30,107 $34,021 $38,444 $43,441 $49,089 X Company is a merchandiser. On December 15, 2015 it sold a particular item to a customer for $1,200. The item had cost X Company $384. The customer paid cash of $300 and promised to pay the remainder the following month. The revenue and expense entries to record this sale would result in a net increase in Retained Earnings of $300 $384 $816 $900 $1,200 $1,500

Explanation / Answer

Insurance payment for the period = Insurance Expense + Closing prepaid insurance - Opening Prepaid Insurance

= 34469+24221-24669 i.e 34021

Increase in retained earnings = Sales - Cost of goods sold

= 1200-384 i.e 816

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