Henderson Owned a Concrete Block Building Valued at $20,000

question 36

True/False

Henderson owned a concrete block building valued at $20,000. Because it was virtually fireproof, he insured it for only $10,000 under a policy of insurance which contained an 80% coinsurance clause. Some time later, the building was damaged by fire. Under the co-insurance clause, the insurer would only be required to pay 80% of the face amount of the policy if the building was totally destroyed by fire.

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Definitions:

Drawing

A withdrawal made by an owner from the business for personal use.

Revenues

Income generated from normal business operations and includes discounts and deductions for returned merchandise.

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities, representing the ownership stake of the owners.

Revenues

The total income generated from normal business operations and other activities over a specific time period.