Answer:
B. 12 Months
Explanation:
Prepaid insurance is a current asset. A current asset is defined as asset that is to be consumed within a financial year in an organisation. A financial year or operating year is usually 12 months or one year.
When the premium was paid January 2, 20x2 for insurance policy to expire 31st December, 20x4, it means 2 extra financial or operating years have been paid. Since prepaid insurance is a current asset that can only reflect assets for 12 months, it means that December 31st 20x2 will only reflect the payment for a year.
The 2nd year premium will reflect as a long-term asset in December 31, 20x2 but will reflect as a current asset by December 31, 20x3.
