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Insurance prepayment

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Insurance prepayment

  • This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • February 15, 2017 at 2:21 pm #372507
    Muhammad
    Member
    • Topics: 3
    • Replies: 6
    • ☆

    Dear sir,
    Kindly help me out because for this question my book has only provided the answer but not the solution.
    A business has an accounting year that ends on 30 sept. Its insurance premium are paid in advance on 1 july each year.premiums have been paid in the three years as follows: Year 1= 1800, Year 2=2000, Year 3=2400. How much will be debited in the income statement for year 3?

    The answer is 2100 but I keep getting 1800. I don’t understand my mistake.

    February 15, 2017 at 5:28 pm #372556
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54668
    • ☆☆☆☆☆

    For the third year, the expense will be 9 months of the year 2 payment (covering 1 October to 30 June, which is 9 months) plus 3 months of the year 3 payment (covering 1 June to 30 September).

    So the total is (9/12 x 2,000) + (3/12 x 2,400) = 2,100.

    Are you watching our free lectures? They are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.

    February 15, 2017 at 5:32 pm #372558
    Muhammad
    Member
    • Topics: 3
    • Replies: 6
    • ☆

    Oh wow ofcourse. Thankyou and I guess this means I need to watch them again.

    February 15, 2017 at 5:42 pm #372562
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54668
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Insurance prepayment’ is closed to new replies.

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