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