Multiple choice

Annual Insurance Premium of Rs. 7,200 is paid on 1st Jan, 2010. What is the amount of Prepaid Insurance Premium, if the books were closed on 31st March, 2011?

  1. Rs. 7,200

  2. Rs. 1,800

  3. Rs. 5,400

  4. Rs. 3,600

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 Books closed on 31st March, 2010 & insurance premium payment period is belongs to 2 financial years. 1st for 3  months & next for 9 months. So amount of prepaid insurance premium is calculated as it: (7,200 / 12) * 9 = Rs. 5,400.