Problem 2-1
Miracle Company
2020
1. Cash 3,600,000
Sales 3,600,000
2. Premiums 390,000
Cash 390,000
3. Cash (5,000 x 10) 50,000
Premium Expense (5,000 x 40) 200,000
Premiums (5,000 x 50) 250,000
4. Premium Expense (5,000 x 20) 100,000
Cash 100,000
5. Premium Expense (2,000 x 60) 120,000
Estimated premium liability 120,000
2021
1. Estimated premium liability 120,000
Premium expense 120,000
Reversing entry
Cash 4,200,000
Sales 4,200,000
2. Premiums 580,000
Cash 580,000
3. Cash (9,000 x 10) 90,000
Premium Expense (9,000 x 40) 360,000
Premiums (9,000 x 50) 450,000
4. Premium Expense (9,000 x 20) 180,000
Cash 180,000
5. Premium Expense (3,000 x 60) 180,000
Estimated premium liability 180,000
Problem 2-2
Cascade Company
