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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

The journal entry at the end of the year that recognizes an additional premium owed under workers’ compensation insurance will include a

  1. (a) debit to Workers’ Compensation Insurance Expense.
  2. (b) debit to Cash.
  3. (c) debit to Workers’ Compensation Insurance Payable.
  4. (d) credit to Workers’ Compensation Insurance Expense.

To determine

Identify the correct entry from the given option for the journal entry at the end of the year that recognizes an additional premium owed under workers’ compensation insurance.

Explanation

Justification for the incorrect answer b, c and d:

Option b. c and d:

An adjustment related to workmen’s compensation insurance is made by the employer, after estimating the actual payroll of the employee during the year end. If the adjustment made by the employer is underpaid then an additional premium is paid by the employer, which increases the expenses and liability of the employer. As a result, while recording the transaction the employer will debit the workmen’s compensation insurance expense and credit the workmen’s compensation payable and not by debiting cash , debiting workmen’s compensation payable and crediting workmen’s compensation insurance expense. Therefore, Option b, c and d are incorrect answer...

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