The following information relates to Ponte Manufacturing Company’s workers’ compensation insurance premiums for 2013. On January 15, 2013, the company estimated its premium for workers’ compensation insurance for the year on the basis of that data.
| Work Classification | Amount of Estimated Wages | Insurance Rates | ||||
| Office work | $ | 54,000 | $ | 0.40/$100 | ||
| Shop work | 298,000 | $ | 5.00/$100 | |||
| 1. | Compute the estimated premiums. (Omit the "$" sign in your response.) |
| Work Classification | Estimated Premiums |
| Office work | $ |
| Shop work | |
| Total | $ |
| 2. | Record in general journal form payment of the estimated premium on January 15, 2013. (Omit the "$" sign in your response.) |
| Date | General Journal | Debit | Credit | |
| Jan. | 15 | Prepaid workers’ compensation insurance | ||
| Cash | ||||
| 3. | On January 4, 2014, an audit of the firm’s payroll records showed that it had actually paid wages of $59,960 to its office employees and wages of $305,320 to its shop employees. Compute the actual premium for the year and the balance due the insurance company or the credit due the firm. (Input all amounts as positive values. Round your answers to 2 decimal places. Omit the "$" sign in your response.) |
| Work Classification | Actual Premiums |
| Office work | $ |
| Shop work | |
| Total | |
| Estimated premiums paid | |
| Additional premium due | $ |
| 4. | Prepare the general journal entry on December 31, 2013, to adjust the Workers’ Compensation Insurance Expense account. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) |
| Date | General Journal | Debit | Credit | |
| Dec. | 31 | Workers’ compensation insurance expense | ||
| Workers’ compensation insurance payable | ||||
| Workers’ compensation insurance expense | ||||
| Prepaid workers' compensation insurance | ||||
| Analyze: |
If all wages were attributable to shop employees, what premium estimate would have been calculated and recorded on January 15, 2013? (Omit the "$" sign in your response.) |
| Premium estimate | $ |
Explanation:
1.
3.
| Work Classification | Estimated Earnings | Insurance Rate | Estimated Premiums | ||||||
| Office work | $ | 54,000 | $ | 0.40/$100 | $ | 216 | |||
| Shop work | $ | 298,000 | $ | 5.00/$100 | 14,900 | ||||
| Total | $ | 15,116 | |||||||
3.
| Work Classification | Actual Earnings | Insurance Rate | Actual Premiums | ||||||
| Office work | $ | 59,960 | $ | 0.40/$100 | $ | 239.84 | |||
| Shop work | $ | 305,320 | $ | 5.00/$100 | 15,266.00 | ||||
| Total | 15,505.00 | ||||||||
| Estimated premiums paid | 15,116.00 | ||||||||
| Additional premium due | $ | 389.84 | |||||||
| Analyze: |
| The premium estimate would have been $17,600 [($54,000 + $298,000) × ($5.00/$100)] |