Which amount is debited as the first quarterly workers' compensation payment expense?

Which amount is debited as the first quarterly workers' compensation payment expense?

• A. 252.00
• B. 126.00
• C. 84.00
• D. 500.00

Answer: (B)

The amount debited is one quarter of the annual premium. When a cost covers a whole year but is paid in four quarterly installments, each quarter represents a portion of the expense for that period. For the first quarter, you recognize just 1/4 of the annual workers’ compensation premium. If the annual premium is 504, the first quarterly payment is 126, so you would debit Workers’ Compensation Expense for 126 and credit Cash for 126. The other options correspond to different fractions of the year or an amount not aligned with the first quarter’s coverage.

The amount debited is one quarter of the annual premium. When a cost covers a whole year but is paid in four quarterly installments, each quarter represents a portion of the expense for that period. For the first quarter, you recognize just 1/4 of the annual workers’ compensation premium. If the annual premium is 504, the first quarterly payment is 126, so you would debit Workers’ Compensation Expense for 126 and credit Cash for 126. The other options correspond to different fractions of the year or an amount not aligned with the first quarter’s coverage.