Answer :
The amount that will appear on the company's income statement will be equal to $8800 that is option A is correct.
Insurance policies are purchased by organizations as a method of future safety as these insurance policies provide some money to the insurance holder in case of any accident occurring within the organization. Now, in order to calculate the amount, first we calculate the Insurance amount per year.
Insurance amount per year = Purchasing amount/time period
Insurance amount per year = $26400/2
Insurance amount per year = $13200
Now, the value per month will be
Insurance amount per month = Insurance amount per year/12
Insurance amount per month = $13200/12
Insurance amount per month = $1100
Now, from May 1 to December 31 will be a period of 8 months. so, the Insurance expense will be
Insurance Expense = Insurance amount per month × 8
Insurance Expense = $1100 × 8
Insurance Expense = $8800
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Complete Question:
On May 1, a two-year insurance policy was purchased for $26,400 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the first year ended December 31?
a. $1,800.
b. $12,600.
c. $14,400.
d. $16,200.