Can anyone tell me if this is correct and if not what I did wrong. Thank you
Exercise 3-7
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
Accrual Basis Cash Basis
Dec. 31, 2003 $_450.00____ $___0__
Dec. 31, 2004 _6,300.00 ___ ___0__
Dec. 31, 2005 _900.00_____ ___0___
Dec. 31, 2006 _____0__ ____0___
Insurance Expense Using
Accrual Basis Cash Basis
Dec. 31, 2003 $4,500.00__$_16,000______
Dec. 31, 2004 __5,400.00______ _______
Dec. 31, 2005 __5,400.00 ____ ___0____
Dec. 31, 2006 __900.00______ ___0____
Total $_16,200.00______ $_16,000__
To determine if the table is correct, we need to calculate the values and see if they match the given information.
First, let's check the insurance expense for 2005. According to the information provided, under the accrual basis, the expense is $5,400, and under the cash basis, it is $0. This means that the company has accrued $5,400 for insurance expense in 2005, but no cash has been paid.
Next, let's fill in the table using the information given and calculate the missing values.
Balance Sheet:
- For December 31, 2003: The accrual basis insurance asset is $450, and the cash basis is $0.
- For December 31, 2004: The accrual basis insurance asset is $6,300, and the cash basis is $0.
- For December 31, 2005: The accrual basis insurance asset is $900, and the cash basis is $0.
- For December 31, 2006: Both the accrual basis and cash basis insurance assets are $0.
Insurance Expense:
- For December 31, 2003: The accrual basis expense is $4,500, and the cash basis expense is $16,000.
- For December 31, 2004: The accrual basis expense is $5,400, and the cash basis expense is unknown.
- For December 31, 2005: The accrual basis expense is $5,400, and the cash basis expense is $0.
- For December 31, 2006: The accrual basis expense is $900, and the cash basis expense is $0.
Total:
- The total insurance premium paid for the policy is $16,200, and the total cash paid is $16,000.
Based on the given information, we can see that the table is correct except for the missing cash basis insurance expense for December 31, 2004. This value is not provided, so we cannot determine it without further information.
To summarize:
- The information provided in the table is correct except for the missing cash basis insurance expense for December 31, 2004.
- The table accurately represents the balance sheet insurance asset and insurance expenses for the given periods, assuming the missing value is unknown.
If you need to complete the table fully, you will need to find the missing cash basis insurance expense for December 31, 2004.