Question

Sensible Insurance Company collected a premium of $18,000 for a 1-year insurance policy on April 1. What amount should Sensible report as a current liability for Unearned Insurance Revenue at December 31?

Answer 1

Answer:

Current liability for 3 months will be $4500

Explanation:

We have given that

Sensible insurance company has collected a premium of $18000

We have given time = 1 year = 12 months

So the premium collected per month [tex]=\frac{$1800}{12}=$1500[/tex

Now, the company has collected the revenue on April 1 and now it is December 31

So number of months from April to December = 9

So total premium earned in 9 months = 9× $1500 = $13500

So current liability for 3 months will be = 3×$1500 = $4500