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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

WORKERS’ COMPENSATION INSURANCE AND ADJUSTMENT Specialty Manufacturing estimated that its total payroll for the coming year would be $450,000. The workers’ compensation insurance premium rate is 0.2%.

REQUIRED

  1. 1. Calculate the estimated workers’ compensation insurance premium and prepare the journal entry for the payment as of January 2, 20--.
  2. 2. Assume that Specialty Manufacturing’s actual payroll for the year is $456,000. Calculate the total insurance premium owed and prepare a journal entry as of December 31, 20--, to record the adjustment for the underpayment. The actual payment of the additional premium will take place in January of the next year.

1.

To determine

Calculate the estimated workers’ compensation insurance premium and prepare the journal entry for the payment as of January 2, 20--.

Explanation

Workmen’s compensation insurance:

Workmen’s compensation insurance is provided to employees as a compensation for the illness or injury suffered by them during the work. The employer pays the full Workmen’s compensation insurance amount to the workers.

Calculate the estimated workers’ compensation insurance premium.

Workmen's Compensation Insurance Expense }=(Total payroll for the coming year)×(Workmen's Compensation Insurance premium rate )=$450,000×0.2%=$900

Therefore, the estimated workers’ compensation insurance premium is $900

2.

To determine

Calculate the total insurance premium owed and prepare a journal entry as of December 31, 20--, to record the adjustment for the underpayment.

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