[angier913]

On March 1, 2003, a company paid a $16,200 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


Balance Sheet Insurance Asset Using Insurance Expense Using

Accrual Cash Accrual Cash
Basis Basis Basis Basis

Dec. 31, 2003 $_______ $_______ 2003 $_______ $_______
Dec. 31, 2004 _______ _______ 2004 _______ _______
Dec. 31, 2005 _______ _______ 2005 _______ _______
Dec. 31, 2006 _______ _______ 2006 _______ _______
Total $_______ $_______

[pready]

For Acrual based Accounting: The formula to figure this out is the price of the insurance/term of the insurance = monthly price for the insurance * the number of months used = Insurance Expense for the accounting period.

$16,200/36 = $450 per month

2003 Insurance Expense = 450 * 10 months used

2004 is 12 months use.

2005 is 12 months use.

2006 is 2 months use.

For Cash Based Accounting. You record the entry only when cash is either received or used.

Your only expense will be in 2003 when you spent cash.