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Details of B Co’s insurance policy are shown below:
Premium for year ended 31 march 20×6 paid april 20×5: $10,800
Premium for year ending 31 march 20×7 paid april 20×6: $12,000What figures should be included in the B Co’s financial statements for the year ended 30 June 20×6 ?
I’ve got the following answer:
Statement P&L: $ 11,100
Statement of Financial Position: 9000 prepaymentSir could you please explain me why ?
Thanks a lot
For the SOPL, we want the expense from 1 July X5 to 30 June X6
From 1 July X5 to 31 March X6 is 9 months, and so the expense for this part of the year is 9/12 x 10,800 = 8,100
From 1 April X6 to 30 June X6 is 3 months, and so the expense for this period is 3/12 x 12,000 = 3,000.
So the total expense is 8,100 + 3,000 = 11,100.As at 30 June X6 they have prepaid the period from 1 July X6 to 31 March X7, which is 9 months. So the prepayment is 9/12 x 12,000 = 9,000 for the SOFP.
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