Question

fill in the blank question
on december 1, a company pays $3,600 for a 36-month insurance policy. after one month, accrual accounting requires $____ (100/3,600) of insurance expense be reported on the income statement ending december 31. however, if cash basis accounting is used, $____ (100/3,600) of insurance expense would be reported at the time of purchase.

Explanation:

Step1: Calculate accrual insurance expense

Monthly expense = $\frac{\text{Total cost}}{\text{Total months}} = \frac{3600}{36} = 100$

Step2: Identify cash basis expense

Cash basis recognizes full payment at purchase: $3600$

Answer:

1. $100
2. $3,600