Lokalalo is a New Zealand company helping Kiwi families redesign their homes. The balance date is 31 August. Lokalalo knows that not all their customers will pay so they take out insurance for that purpose. The insurance does not cover them for their full loss unfortunately. Lokalalo pays for the insurance in advance, which gives them 12 months of cover. Lokalalo paid $15,000 on 1 August 2020 for cover for the next 12 months. Paulo Jr. asks you the following questions (You do not need to provide the definition of any assets, liabilities, income or expenses. If you believe there is no effect on one financial statement, please state “no effect” instead of leaving a blank): What happens in the balance sheet, income statement and statement of cash flows on the date of the transaction when the $15,000 is paid? When the cash is paid on 1 August 2020:
Lokalalo is a New Zealand company helping Kiwi families redesign their homes. The balance date is 31 August.
Lokalalo knows that not all their customers will pay so they take out insurance for that purpose. The insurance does not cover them for their full loss unfortunately. Lokalalo pays for the insurance in advance, which gives them 12 months of cover. Lokalalo paid $15,000 on 1 August 2020 for cover for the next 12 months.
Paulo Jr. asks you the following questions (You do not need to provide the definition of any assets, liabilities, income or expenses. If you believe there is no effect on one financial statement, please state “no effect” instead of leaving a blank):
What happens in the
- When the cash is paid on 1 August 2020:
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