Sugar City Uses the Purchases Method to Record All Prepayments

question 3

Multiple Choice

Sugar City uses the purchases method to record all prepayments.The City has a 6/30 fiscal year-end.On 12/31/10, the City purchased a three-year insurance policy covering all city owned vehicles accounted acquired by the General Fund to be used in general government activity.Cost of the policy was $360,000.After the 6/30/11 closing entries, the appropriate balance sheet accounts and balances associated with this transaction are in the City's General Fund:

• A)Prepaid insurance $300,000; Expenditure $60,000.
• B)Prepaid insurance $300,000; Expenditures $360,000
• C)Prepaid insurance $0; Expenditure $360,000.
• D)Prepaid insurance $0; Expenditures $60,000.

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Definitions:

Phalanges

The bones of the fingers and toes in humans and other vertebrates.

Proximal End

The part of a limb or structure that is closest to the center of the body.

Radius

The radius is one of the two large bones of the forearm, located on the thumb side when the palm is facing up.

Ulna

The longer of the two bones in the forearm, running parallel to the radius and forming the elbow joint at its larger end.