Question

Fink Insurance collected premiums of $18,900,000 from its customers during the current year. The adjusted balance in the Deferred premiums account increased from $5.0 million to $8.8 million dollars during the year. What is Fink's revenue from insurance premiums recognized for the current year?

Answer 1

$15.1 million.

Step-by-step explanation:

When insurance companies are accounting for their revenue for the year, there are a lot of adjustment made in regard of amount collected from customers. One of such adjustments is adjustment in deferred premium account. Deferred premiums are premiums collected but not yet due.

Such income is adjusted for when calculating the revenue for the year.

An increase in the adjustment means more premiums are paid in advance in current year and has to be deducted from premiums collected in the current year and vice versa.

In the case of Fink Insurance, the increase of $3.8 million ($8.8 million - $5.0 million) will be deducted from the premiums collected($18.9 million) in the current year to arrive at revenue to be recognized for current year.

Current year revenue = $18.9 million - $3.8 million

Current year revenue = $15.1 million.