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:
Check 2005 insurance expense:
Accrual, $5,400; Cash, $0. Dec. 31, 2005,
asset: Accrual, $900; Cash, $0.
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 $_______ $_______
For Insurance expense I have
accrual basis Cash basis
4500 16200
5400 0
5400 0
900 0
Can some one pleas help with the insurance asset part thank you
Balance Sheet Insurance Asset Using Insurance Expense Using
Accrual Cash Accrual Cash
Basis Basis Basis Basis
Dec. 31, 2003 $16,200 $0 2003 $0 $16,200
Dec. 31, 2004 $13,800 $0 2004 $4,400 $0
Dec. 31, 2005 $9,900 $0 2005 $5,400 $0
Dec. 31, 2006 $4,500 $0 2006 $5,400 $0
Total $16,200 $0
Based on the information provided, we can calculate the insurance asset for each year using the accrual basis and cash basis.
Dec. 31, 2003:
Accrual Basis: The insurance expense for 2003 is $4,500. Since the policy started on March 1, 2003, it covers 10 out of the 12 months. So, the insurance asset on Dec. 31, 2003, would be (10/12) * $16,200 = $13,500.
Cash Basis: The cash paid for insurance in 2003 is $16,200. However, since the policy started on March 1, 2003, only 10 months of coverage were provided in 2003. So, the insurance asset on Dec. 31, 2003, would also be (10/12) * $16,200 = $13,500.
Dec. 31, 2004:
Accrual Basis: The insurance expense for 2004 is $16,200. Since the policy covers 12 months in 2004, the insurance asset on Dec. 31, 2004, would be $16,200.
Cash Basis: No cash was paid for insurance in 2004, so the insurance asset on Dec. 31, 2004, would still be $13,500.
Dec. 31, 2005:
Accrual Basis: The insurance expense for 2005 is $5,400. From the given information, the accrual insurance asset on Dec. 31, 2005, is $900.
Cash Basis: No cash was paid for insurance in 2005, so the insurance asset on Dec. 31, 2005, would still be $13,500.
Dec. 31, 2006:
No specific information is given regarding insurance expenses or cash payments for 2006. Therefore, we cannot determine the insurance assets for Dec. 31, 2006.
Total:
From the calculations above, the total insurance asset would be the sum of the insurance assets on each respective date.
Balance Sheet
Insurance Asset Accrual Cash
Dec. 31, 2003 $13,500 $13,500
Dec. 31, 2004 $16,200 $13,500
Dec. 31, 2005 $900 $13,500
Dec. 31, 2006 - -
Total $30,600 $40,500
It's important to note that the information provided might not be sufficient to accurately calculate the insurance asset for all the given dates.
To determine the insurance asset values for each year, we need to consider the remaining duration of the insurance policy and how it is allocated over time.
Let's start with the given information:
- The company paid a $16,200 premium for a 36-month insurance policy on March 1, 2003.
- We need to calculate the insurance asset for each year until December 31, 2006.
The insurance asset is the value of the insurance coverage that has not yet been used or expired. It is typically allocated based on the time that has passed since the policy started.
Here's how you can calculate the insurance asset for each year:
1. Calculate the total insurance asset value over the policy period:
Insurance Asset = Total Premium - Total Insurance Expense
In this case:
Total Premium = $16,200
Total Insurance Expense = $5,400 (2003) + $5,400 (2004) + $900 (2005) = $11,700
Insurance Asset = $16,200 - $11,700 = $4,500
2. Allocate the insurance asset over the years based on the remaining policy duration:
Year 2003 (March 1 to December 31):
The insurance policy started on March 1, 2003, so there are 10 months remaining in this year.
Insurance Asset = Total Asset * (Remaining Months / Total Policy Duration) = $4,500 * (10/36) ≈ $1,250
Year 2004 (January 1 to December 31):
The insurance policy has 12 months in this year.
Insurance Asset = Total Asset * (Remaining Months / Total Policy Duration) = $4,500 * (12/36) ≈ $1,500
Year 2005 (January 1 to December 31):
Insurance Asset = $900 (given in the table)
Year 2006 (January 1 to December 31):
The insurance policy has expired by this year, so the insurance asset is $0.
Now we can complete the table:
Balance Sheet Insurance Asset Using
Accrual Cash Insurance Expense
Basis Basis Basis Basis
Dec. 31, 2003 $1,250 $0 2003 $4,500 $4,500
Dec. 31, 2004 $1,500 $0 2004 $1,500 $5,400
Dec. 31, 2005 $900 $0 2005 $900 $5,400
Dec. 31, 2006 $0 $0 2006 $0 $5,400
Total $3,650 $0 Total $7,900 $20,700
The insurance asset gradually decreases over time as the policy is being used or expires. This is reflected in the table, which shows the remaining insurance asset at the end of each year.