Compute and Record Workers' Compensation Insurance Premiums for Evergreen Manufacturing

question 53

Essay

Compute and record workers' compensation insurance premiums for Evergreen Manufacturing as follows:
1.The firm estimates that its office employees will earn $49,000 next year and its factory employees will earn $150,000.The firm pays the following rates for workers' compensation insurance: $0.40 per $100 of wages for the office employees and $3.50 per $100 of wages for the factory employees.Compute the estimated premiums for 2016.On page 54 of a general journal,record the payment of the estimated premium.Date the entry January 12,2016.
2.On January 4,2017,an audit of the firm's payroll records for 2016 showed that the firm had actually paid wages of $53,000 to its office employees and $161,000 to its factory employees.Compute the actual premium for the year and the balance due the insurance company or the credit due the firm.In the general journal,record the entry to adjust the Workers' Compensation Insurance Expense as of the end of 2016.Date the entry December 31,2016.

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Definitions:

Risk Neutral

A condition in which an individual or entity shows indifference between choices that have different levels of risk, focusing solely on potential outcomes regardless of uncertainty.

Expected Level

the anticipated quantity or value in a given context, often based on statistical analysis or previous observations.

Risk Aversion

A preference for options that offer more certainty and less potential for loss.

Insurance Policy

A contract between an individual or entity and an insurance company, outlining the terms under which insurance coverage is provided.