Question

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 1

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