Question

mountaineer excavation operates in a low - lying area that is subject to heavy rains and flooding. because of this , mountaineer purchases one year of flood insurance in advance on march 1, paying $35,400 (2,950/month) chapter 3 homework question 2

Answer 1

Answer to the storiesen (1) Recording the prichqie of insurance in advance on March The company has made an advance payment of invence - expense of which some of the are related to next financial 2 year. At the time of purchase of indy_ance the company will record és Enly will' be! Mar I I Repaid I114240ce Ale - Ovo | 35400 colo To Cash Ale 35400 (geling to record prepaid insurance in advance paid in March 1) 16.) Adisting_enby to be move on December 3). At the year end, the expenses related to the financial year will be recognized to the extegt that such iqumed as per the accoudl methal. The expenses which are related to another year will be adjusted In the question, company paid innevance expense from March to December ie 10 months? Therefore, the company will record sevance expense for 10 months جمع وماتلمن اعلان 29500 2910o Dec 3) L'Insercoce Expense Ale ($ 2950 x 10 months or - To Prepaid Insurance Alc reeing to record insurance expenses I for the current financial year) - -4 (3) Glculation of year end adjusted balances of Repaid Instance AL_Zwance_Expone_ N

Cij Alunted Year end balance of prepaid insurance - The company has paid 10_months_20s4vquse expenje The company paid all the 12 months insurance expense on March to build s : $ 35400 - [ $2950 x 10 mm ii Balance of Prepaid Insurance on Dec.31 a $ 35400 -129500 2 $ 5900 Cij) Adiuted Year end balance of insurance expense. for the warent financial year, the company litri all the 10 months insurance expense from mouth o the end of december, pold and to - 3 $ 2950 X 10 montho ...Balence of Insurance Expense on Dec 31 - . $ 29500