[yhe1223]

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.

a 6 months c. 18 months

b 12 months d.24 mont

Thank you !!!

Step by step
BEC 75 2013/11
FAR 76 2014/10
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[Mamabear]

I think it's B–An asset is classified as current if it is turned to cash within one year or the operating cycle, whichever is longer.

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[yhe1223]

Thank you @Mamabear, so it does not matter if its for a 3 year life?

Step by step
BEC 75 2013/11
FAR 76 2014/10
AUD 87 2015/1
REG 83 2015/3

[JamesBJames]

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.

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[Mamabear]

The 3 year life means that 1 year of it was expensed in 2009, 1 year of it is a current asset for 2010 (reported on the 12/31/09 balance sheet date), and 1 year of it is a noncurrent asset for 2011.

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[yhe1223]

Thank you guys！！！ Really helpful！！！

Step by step
BEC 75 2013/11
FAR 76 2014/10
AUD 87 2015/1
REG 83 2015/3

[warsidi]

In my opinion, the best answer is B, the prepaid insurance is for the next 12 months. The reminder future benefit related to 2011 is properly classified non-current asset.

[Ally]

Thanks for clearing this up!

[Ally]

Thanks for clearing this up!

[Ally]

Thanks for clearing this up!

[Author]

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