Transcript

$0$:$13$ beginning on December $1,$ Year $1.$

$0$:$16$ Accrual accounting requires that $$100($or $$2,400$ divided by $24$ months$)$

$0$:$24$ of insurance expense be reported on December Year $1,$ income statement.

$0$:$30$ Another $$1,200$ of expense is reported in Year $2,$

$0$:$35$ and the remaining $$1,100$ is reported as expense in the first $11$ months of Year $3.$

$0$:$42$ Because the insurance premiums were paid in advance and cover a period of time,

$0$:$48$ those premiums expire $($or are used up$)$ as time passes.

$0$:$53$ Any unexpired $($that is$,$ unused$)$ premium is reported as an asset on the balance sheet.

$1$:$00$ Because the payment of $$2,400$ was made on December $1,$ Year $1,$

Knowledge Check $01$

Aurora Corporation operated without insurance coverage for the first month of operations. Then, on Fe

$$4,800$ premium on a two$-$year insurance policy with benefits beginning on that date. The company us

insurance expense will be reported on the company's income statement for their first year ended Dece

$$200$

$$2,200$

$$4,600$

$$4,800$