ON APRIL 1, THERE WAS $5,000 OF PREPAID INSURANCE DURING THE YEAR, A TOTAL OF $12,000...

ON APRIL 1, THERE WAS $5,000 OF PREPAID INSURANCE

DURING THE YEAR, A TOTAL OF $12,000 WAS PAID OUT IN INSURANCE PREMIUMS.

ON MAY 31, THE PREPAID INSURANCE WAS $6,000

CALCULATE THE INSURANCE EXPENSE FOR THE YEAR
IF YOU ARE TOLD THAT THE CORPORATION HAS RECEIVED $5,000 FOR AN INSURANCE CLAIM DURING THE YEAR, WHAT WOULD BE THE CHANGE IN THE INSURANCE EXPENSE?

Solutions

Expert Solution

Actual expense insurance during the year is equal to

Prepaid insurance+insurance paid - prepaid insurance of the next year.

Hence insurance expense=5000+12000-6000=11000

Insurance claim does not affect the insurance expense.

It is to be credited separately and not be set-off in the expense.

ekkarill92 answered 1 year ago

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