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Hi,Sir.
a very good day to you.for this question right?Actually how to do this kind of question?
A business makes up its financial statements to 30Apr each year.Included in the ledger account balances on 1 May2011 was insurance (debit). $800 .on 31 October 2011 an insurance premium of $2100 was paid for the year ending 31 October 2012 .which amount was changed for insurance in the income statement for the year ended 30 April 2012?
The answer is $1850
Kindly reply,
Thank you
(This forum is for students to help each other – but it seems as though nobody has done here! If you want to ask a question of me then you should use the Ask the Tutor forum)
As at 30 April 2012, we had prepaid the period from 1 May to 31 October 2012 (6 months). The prepayment at the end of the year is therefore 6/12 x 2100 = $1,050.
So the expense for our year is 800 (the amount paid last year in respect of this year) + 2100 (the cash paid this year) – 1050 (the amount included in this years payment that is in respect of next year). The total equals $1850.
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