John Has an Auto Which Is Covered for Collision Losses

question 23

Multiple Choice

John has an auto which is covered for collision losses subject to a $250 deductible.Kate's auto also has collision coverage but her deductible is $500.Which of the following statements describes how a $2,000 collision loss will be paid if it occurs when John borrows Kate's car because his car is in the shop for repairs?

• A)John's policy will pay $1,500,and Kate's policy will pay nothing.
• B)John's policy will pay $1,750,and Kate's policy will pay nothing.
• C)Kate's policy will pay $1,750,and John's policy will pay nothing.
• D)Kate's policy will pay $1,500,and John's policy will pay $250.

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Definitions:

Cash Collections

The process of gathering all cash received during a period, including sales revenues and other income.

Worksheet

A multiple-column form that may be used in making adjusting entries and in preparing financial statements.

Statement of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives.

Indirect Method

A way of reporting cash flows from operating activities by starting with net income and adjusting for non-cash transactions.