The premium on a three-year insurance policy expiring on December 31, 2011 was paid in total on January 1, 2009. If the company has six-month operating cycle, then on December 31. 2009, the prepared insurance reported as a current asset would be for a.
I remember having this question in Becker. The answer is B. Current assets are assets that will be converted to cash in a year or less, although there are some rare exceptions where the operating cycle might take longer than a year and you would use that time period instead.
For 99% of questions, current assets are for 12 months or less.
In this question, 12 months of the prepaid insurance is a current asset. The remainder is a non-current asset.