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Details of a companys insurance policy are shown below:
Premium for the year ended 31 March 2008 paid April 2007 $25920
Premium for year ending 31 March 2009 paid April 2008 $28800What figures should be included in the companys statements of profit or loss and statement of financial position?
Can i see the method of calculation please?I cannot answer this because you have not said what the company’s year end is.
If you tell me the reporting date then I will explain.
We need the expense for the period 1 July 2007 to 30 June 2008
From 1 July 2007 to 31 March 2008 is 9 months, so 9/12 x 25920 = 19440
From 1 April 2008 to 30 June 2008 is 3 months, so 3/12 x 28800 = 7200So the total expense is 19440 + 7200 = 26640
The prepayment as at 30 June 2008 is for the period 1 July 2008 to 31 March 2009, so is 9/12 x 28,800 = 21,600.
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