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Working Backward: Prepaid Insurance
On December 31, 2014, Baxter Company reported $8,000 in prepaid insurance on its balance sheet. The insurer requires Baxter to pay the annual premium of $24,000 in advance.
Required
1. How much will Baxter recognize each month in insurance expense?
2. On what date does Baxter renew its insurance policy? Explain your answer.
-What hypotheses are you testing on these?
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