Compute and record workers' compensation insurance premiums for Fairlawn Manufacturing as follows: The firm estimates that...

Compute and record workers' compensation insurance premiums for Fairlawn Manufacturing as follows:

The firm estimates that its office employees will earn $43,000 next year and its factory employees will earn $158,000. The firm pays the following rates for workers’ compensation insurance: $0.60 per $100 of wages for the office employees and $4.70 per $100 of wages for the factory employees. Compute the estimated premiums for 2019. In the general journal, record the payment of the estimated premium. Date the entry as January 12, 2019.
On January 3, 2020, an audit of the firm’s payroll records for 2019 showed that the firm had actually paid wages of $45,000 to its office employees and $161,000 to its factory employees. Compute the actual premium for the year and the balance due to the insurance company or the credit due to the firm. In the general journal, record the entry to adjust the Workers’ Compensation Insurance Expense as of the end of 2019. Date the entry December 31, 2019.

Compute the estimated premiums for 2019. Record the payment of the estimated premium. Date the entry January 12, 2019. Compute the actual premium for the year and the balance due to the insurance company or the credit due to the firm. (Enter all answers as positive values.) In the general journal, record the entry to adjust the Workers’ Compensation Insurance Expense as of the end of 2019. Date the entry December 31, 2019

Solutions

Expert Solution

Calculation of estimated premium for 2019

Employees	Expected salaries	Expected Insurance Premium
		Office employes $0.60 per $100 of wages
		Factory employes $4.70 per $100 of wages

Office employees	43000	258	(43000 *0.6 /100 )
Factory employees	158000	7426	(158000 *4.7 /100 )
Total Insurance premium		7684

Calculation of Actual premium for 2019

Employees	Actual salaries	Actual Insurance Premium
		Office employes $0.60 per $100 of wages
		Factory employes $4.70 per $100 of wages

Office employees	45000	270	(45000 *0.6 /100 )
Factory employees	161000	7567	(161000 *4.7 /100 )
Total Insurance premium		7837

Journal entry for recording payment of estimated premium

Date General Journal Debit ($) Credit ($)

Jan. 12, 2019 Prepaid insurance A/c ............................Dr. 7684

To Cash A/c ...............................Cr. 7684

(Being entry for recording of estimated insurance premium

at the beginning of the year)

Dec. 31, 2019 Insurance expense A/c ............................Dr. 7837

To Prepaid insurance A/c ...................Cr. 7684

To Cash A/c .......................................Cr. 153

(Being entry for recording of actual insurance expense)

ekkarill92 answered 1 year ago

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