1. On March 1, a business paid $3,600 for a twelve month liability insurance policy. On April 1 the same business entered into a two-year rental contract for equipment at a total cost of $18,000. Determine the following amounts: (a) insurance expense for the month of March (b) prepaid insurance as of March 31 (c) equipment rent expense for the month of April (d) prepaid equipment rental as of April 30

a $300

b $3,300

c $750

d $17,250

Explanation:

The computation is shown below:

a. Insurance expense for march month:

= Total insurance expense : total number of months in a year

= $3,600 : 12 months

= $300

b. Prepaid insurance

= Total insurance expense - march insurance expense

= $3,600 - $300

= $3,300

c. Rent expense for equipment for April month

= Total rent cost : total number of months in two year

= $18,000 : 24 months

= $750

d. Prepaid rent expense

= Total rent cost - April rent expense

= $18,000 - $750

= $17,250