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Question

On March 1, 2003, a company paid a $16,200 premium on a 36- month insurance policy for a coverage beginning on that date. Refer to that policy and fill in the blanks in the following table:

Balance Sheet Insurance Asset Using
Accrual Cash
Basis Basis
Dec, 31, 2003 $_16,200 $_0__

Dec. 31, 2004 $__________ $_______________

Dec. 31, 2005 $__________ $_______________

Dec 31, 2006 $__________ $_______________

Insurance Expense Using

Accrual Cash
Basis Basis
Dec, 31, 2003 $_4500_ $__0____

Dec. 31, 2004 $ _5400____ $___0____

Dec. 31, 2005 $_5400 $___0___

Dec 31, 2006 $__________ $________

Answer 1

to a month a mount covered is 16200:36=450 dollars

Answer 2

Check
2005 insurance expense: Accrual, $5,400; Cash, $0. Dec. 31, 2005,
asset: Accrual, $900; Cash, $0.

Balance Sheet Insurance Asset Using

Accrual Basis Cash Basis
Dec. 31, 2003 $11,700 $0
Dec. 31, 2004 $ 6,300 0
Dec. 31, 2005 $ 900 0
Dec. 31, 2006 $ 0

Accrual Basis Cash Basis
2003 $4,500 $16,200
2004 5,400 0
2005 5,400 0
2006 900 0
Total $ 16,200
========
Explanation

Monthly premium per month $450
$16,200 / 36 = $450
Remaining
2003 26 months $11,700
2004 14 6,300
2005 12 4,500
2006 12 4.500