Accurals and prepayment

This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.

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May 1, 2016 at 1:11 am #313215
abrizni10
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Sir pls help me with this

The annual insurance premium for S for the period 1 July 20X3 to 30 June 20X9 is $13200
Which is 10% more than the previous year. Insurance premiums are paid on 1 July.

What is the charge of Profit or loss for insurance for the year ended 31 December 20X3.

My working was
13200 × 90%= 11800

11800× 6/12 = 5940
13200 × 6/12 = 6600

So charge for the year – 12540, but in the kaplan answer it was 12600?
May 1, 2016 at 8:39 am #313236
John Moffat
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10% more than 11800 does not come to 13200 !!

The current premium is 13200, and so the previous premium was 100/110 x 13200 = 12000

So the expense in the SOPL is (6/12 x 12000) + (6/12 x 13200) = 12,600
May 1, 2016 at 9:39 am #313246
abrizni10
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Sorry sir, I don’t still get it
May 1, 2016 at 1:23 pm #313257
John Moffat
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The question says that this years premium is 10% more than the previous year.

So the previous year was 12,000. If you add 10% of 12,000 then you get 13,200.
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