1.
Calculate the estimated amount of worker’s compensation insurance premium for office and delivery employees.
1.
Explanation of Solution
Worker’s Compensation Insurance: Worker’s compensation insurance covers the amount of insurance to be provided to an employee in case of injury suffered while working on the job. This insurance also compensates the families of deceased employees, if the death occurs in course of employment.
The purpose of providing worker’s compensation insurance to employees is to compensate them for the loss of wages due to occurrence of injury. Under this type of insurance, medical benefits are also provided to injured employees.
Calculate the estimated amount of worker’s compensation insurance premium for office and delivery work.
Hence, the estimated amount of worker’s compensation insurance premium for office work and delivery work is $250 and $18,480 respectively.
2.
Journalize the entry to record the payment of the estimated premium on January 17, 2019.
2.
Explanation of Solution
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
Prepare general journal entry to record the payment of the estimated premium on January 17, 2019.
| General Journal | Page 7 | ||||||
| Date | Accounts and Explanation | Post Ref | Debit ($) | Credit ($) | |||
| 2019 | Prepaid Workers’ Compensation Insurance | 18,730 | |||||
| January | 17 | Cash | 18,730 | ||||
| (To record the payment of the estimated premium) | |||||||
Table (1)
- Prepaid Workers’ Compensation Insurance is an asset and it is increased. So, debit it by $18,730.
- Cash is an asset and it is decreased. So, credit it by $18,730.
Working note:
Calculate the total estimated amount of worker’s compensation insurance premium.
3.
Calculate the actual amount of worker’s compensation insurance premium and the balance due for office and delivery work.
3.
Explanation of Solution
Worker’s Compensation Insurance: Worker’s compensation insurance covers the amount of insurance to be provided to an employee in case of injury suffered while working on the job. This insurance also compensates the families of deceased employees, if the death occurs in course of employment.
The purpose of providing worker’s compensation insurance to employees is to compensate them for the loss of wages due to occurrence of injury. Under this type of insurance, medical benefits are also provided to injured employees.
Calculate the total actual amount of worker’s compensation insurance premium and the balance due for office and delivery work.
|
Actual Earnings (A) |
Insurance Rate (B) |
Actual Premiums (c) = (A) x (B) | |
| Office work | $52,970 | $0.50/$100 | $264.85 |
| Delivery work | $316,240 | $6.00/$100 | $18,974.40 |
| Total | $19,239.25 | ||
| Less: Estimated premiums paid | $18,730.00 | ||
| Additional premium due | $509.25 |
Table (2)
4.
Journalize the entry to adjust the workers’ compensation insurance expense.
4.
Explanation of Solution
Prepare general journal entry to record the adjustment of the workers’ compensation insurance expense.
| General Journal | Page 98 | ||||||
| Date | Accounts and Explanation | Post Ref | Debit ($) | Credit ($) | |||
| 2019 | Workers’ Compensation Insurance Expense | 509.25 | |||||
| December | 31 | Workers’ Compensation Insurance Payable | 509.25 | ||||
| (To adjust workers’ compensation insurance expense) | |||||||
| December | 31 | Workers’ Compensation Insurance Expense | 18,730 | ||||
| Prepaid Workers’ Compensation Insurance | 18,730 | ||||||
| (To adjust prepaid workers’ compensation insurance) | |||||||
Table (3)
- Workers’ Compensation Insurance Expense is an expense and it decreases the equity value. So, debit it by $509.25.
- Workers’ Compensation Insurance Payable is a liability and it is increased. So, debit it by $509.25.
- Workers’ Compensation Insurance Expense is an expense and it decreases the equity value. So, debit it by $18,730.
- Prepaid Workers’ Compensation Insurance is an asset and it is decreased. So, credit it by $18,730.
Analyze: The balance of Workers’ Compensation Insurance expense account at December 31, 2019 is $19,239.25
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Chapter 11 Solutions
COLLEGE ACCOUNTING ETEXT+CONNECT ACCESS
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