Question

Aurora corporation operated without insurance coverage for the first month or operations then on February 1st the company paid the $4,800 premium on a 2-year insurance policy with benefits beginning on that date the company uses the cereal basis how much insurance expense will be reported on the companies income statement for the first year ended December 31st

Answer 1

$2200

Step-by-step explanation:

The accrual basis recognizes revenues and expenses when the event warranting the income or expenditure occurs. In this case, the expenditure to be recognized is for the 11 months of insurance coverage.

For 24 months, the premiums are $4800. premiums for one month will be

= $4800/24

=$200

Premiums for 11 months

= $200 x 11

=$2200