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3 welcome! LinkedIn In Search l LinkedIn x t (5) Tumblr x R My Account I Wix.corm x Wix Website Editor x Chegg.com a Amazon.com: Entrepreneu x www.chegg.com/homework-help baxter-c-chapter-4-problem-7e-solutio help/working-backward-prepaid-insurance 31-2014-b 9781285972572 home study business accounting solutions manual/financial accounting 9th edition chapter 4 problem 7e TEXTBOOK SOLUTIONS FOR Financial accounting 9th Edition v show all steps Chapter: CH4 Problem: 7E Question: Working Backward: Prepaid Insurance CH4 7DC On December 31, 2014, Baxter Company reported $8,000 in prepaid insurance on its balance sheet. The insurer requires Baxter to pay the annual premium of $24,000 in advance. Required 1. How much will Baxter recognize each month in insurance expense? 2. On what date does Baxter renew its insurance policy? Explain your answer We don't have the solution to this problem yet. Get help from a Chegg subject expert. Ask an expert CH47P Indispensable 7:34 PM 2/13/2016

Explanation / Answer

(a) Prepaid insurance on 31 December 2014 = $8,000

Annual premium = $24,000

Then Per month premium expense = 24000/12 = $2,000

Hence Baxter will recognize $2,000 each month in insurance expense.

(b) Since $8,000 is prepaid balance on 31 December 2014 and annual prepaid premium is $24,000,

Since Per month premium expense is $2,000 it means $8,000 balance will be expensed in next 4 months. i.e. on 30april 2015.

So on 1 may 2015 Baxter renew its insurance policy.

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