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Question:The insurance premium was paid for one year to 28 February 2021.There was no insurance policy prior to this.
The amount stated in trial balance $5688.The accounting period ended 31 December 2020.How to solve this question?
You have not written what the question asked for.
Assuming that the prepayment has not been recorded, then $5,688 is the amount that was paid for the year to 28 February 2021.
Therefore, as at 31 December 2020 they have prepaid 2/12 x 5688 = 948, and the expense in the SOPL is 10/12 x 5688 = 4,740.
This is all explained in my free lectures on accruals and prepayments. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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