On June 1, 2017, a company paid an $25,200 premium on a 36-month insurance policy for coverage beginning on that date. Refer to that policy and fill in the blanks in the following table.
I need the values for X in the table below:
Balance Sheet |
Income Statement |
||||
Prepaid Insurance |
Insurance Expense |
||||
Accrual Basis |
Cash Basis |
Accrual Basis |
Cash Basis |
||
Dec. 31, 2017 |
X |
$0 |
2017 |
X |
$25,200 |
Dec. 31, 2018 |
X |
0 |
2018 |
X |
0 |
Dec. 31, 2019 |
X |
0 |
2019 |
X |
0 |
Dec. 31, 2020 |
X |
0 |
2020 |
X |
0 |
0 |
Total |
$0 |
25,200 |
Answer:
Balance Sheet | Income Statement | |
Prepaid Insurance | Insurance Expense | |
Accrual Basis | Accrual basis | |
Dec.31,2017 | $20,300 | $4,900 |
Dec.31,2018 | $11,900 | $8,400 |
Dec.31,2019 | $3,500 | $8,400 |
Dec.31,2020 | $0 | $3,500 |
Calculations:
i. For insurance expense:
Year | Months covered | x | Insurance expense per month | = | Insurance expense |
2017 | 7 | x | $700 | = | $4,900 |
2018 | 12 | x | $700 | = | $8,400 |
2019 | 12 | x | $700 | = | $8,400 |
2020 | 5 | x | $700 | = | $3,500 |
Total | 36 | $25,200 |
ii. For Prepaid insurance:
Prepaid insurance | |
June 1,2017 Balance | $25,200 |
(Less): Insurance expense for 2017 | ($4,900) |
Dec 31,2017 | $20,300 |
(Less): Insurance expense for 2018 | ($8,400) |
Dec 31,2018 | $11,900 |
(Less): Insurance expense for 2019 | ($8,400) |
Dec 31,2019 | $3,500 |
(Less): Insurance expense for 2020 | ($3,500) |
Dec 31,2020 | $0 |
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