wp, inc. pays $18,000 for an annual insurance policy on march 1, 2021. they initially debit prepaid insurance for that amount. if wp only prepares adjusting journal entries at the end of the year (12/31), how much prepaid insurance will appear on the december 31, 2021 balance sheet as a result of this transaction?

Answer :

$3,000 prepaid insurance will appear on the december 31, 2021 balance sheet

WP will have used $15,000 of the insurance after 10 months (March to December) ($18,000 x 10/12). As of 12/31/2021, $3,000 will still be listed as an asset on the balance sheet.

A balance sheet, also referred to as a statement of financial position or a statement of financial condition in financial accounting, is a summary of the financial standing of a person or an organization, including a corporation, private limited company, sole proprietorship, business partnership, government agency, or not-for-profit organization. As of a particular date, such as the conclusion of its financial year, assets, liabilities, and ownership equity are listed. It's common to refer to a balance sheet as a "picture of a company's financial status." The balance sheet is the only one of the four fundamental financial statements that only applies at one particular period in a company's fiscal year.

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