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    MzMaria2's Avatar
    MzMaria2 Posts: 1, Reputation: 1
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    #1

    Mar 6, 2009, 11:19 PM
    Determining assets and expenses for accrual and cash accounting
    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 $_______ $_______

    Check 2005 insurance expense:
    Accrual, $5,400; Cash, $0. Dec. 31, 2005,
    Asset: Accrual, $900; Cash, $0.
    ROLCAM's Avatar
    ROLCAM Posts: 1,420, Reputation: 23
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    #2

    Mar 6, 2009, 11:43 PM

    The Cash entry only appears in the year ended
    December 2003. Insurance Expense $16,200.

    ##############################

    The Accrual entries are used from the following :-


    On March 1, 2003, a company paid a $16,200
    premium on a 36-month insurance policy for coverage
    beginning on that date.

    Allocation of $16,200 over 36 months.
    16,200/36 = 450 a month

    date
    200303 1 450
    200304 2 450
    200305 3 450
    200306 4 450
    200307 5 450
    200308 6 450
    200309 7 450
    200310 8 450
    200311 9 450
    200312 10 450

    year 2003 10 4500

    200401 1 450
    200402 2 450
    200403 3 450
    200404 4 450
    200405 5 450
    200406 6 450
    200407 7 450
    200408 8 450
    200409 9 450
    200410 10 450
    200411 11 450
    200412 12 450

    year 2004 5400

    200501 1 450
    200502 2 450
    200503 3 450
    200504 4 450
    200505 5 450
    200506 6 450
    200507 7 450
    200508 8 450
    200509 9 450
    200510 10 450
    200511 11 450
    200512 12 450

    year 2005 5400

    200601 1 450
    200602 2 450

    year 2006 900

    You are quite correct in your assumptions.
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