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14 July, 05:31

Eve's Apples opened business on January 1, 2016, and paid for two insurance policies effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What is the balance in Eve's prepaid insurance as of December 31, 2016?

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  1. 14 July, 05:40
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    The balance in Eve's prepaid insurance as of December 31, 2016 is $18,000

    Explanation:

    The computation of the balance of prepaid insurance is shown below:

    = Per month policy one amount * total number of months in a year + Per month policy one amount * total number of months in a year

    where,

    Per month liability policy amount = Insurance amount : given months

    = $36,000 : 18 months

    = $2,000

    Per month crop damage policy amount = Insurance amount : given months

    = $12,000 : 24 months

    = $500

    Now put these values to the above equation

    So, the value would equal to

    = ($2,000 * 12 months) : 12 months + $500 * 12 months

    = $12,000 + $6,000

    = $18,000

    For computing the December 2016, we divided the 12 months from the liability policy
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