CPH+Insurance+Month+End+Process+&Prepayment

Premium funding 1. Premium $16,292.12 2. Credit Charge $1,057.36 - Balance $17349.48

3. Loan Fee $150.00

The total amount to be repaid is $17,349.48 which includes an interest component of $1,057.36. The application fee of $150.00 is separate to this amount and is payable with your total initial payment.

a total of 15 monthly instalment of $1,156.63 are required. Monthly interest repayment: $1,057.36/15=$70.49 monthly premium repayment : ($1,7349.48-$1,057.36) / 15=$1,086.14

The journals for the insurance funding would be as follows.

Debit prepaid insurance $14,811.02 Debit GST $1,481.10 Credit insurance funding $16,292.12

__First repayment__ Credit bank $1,306.63 Debit borrowing costs $150.00 Debit interest $70.49 Debit insurance funding $1,086.14

__Ongoing repayments__ Credit bank $1,156.63 Debit interest $70.49 Debit insurance funding $1,086.14

I assume that the prepaid insurance of $14,811.02 is for 12 months? Therefore, the monthly amortisation journal would be $1,234,25. i.e.

debit insurance expense $1,234.25 and credit prepaid insurance $1,234.25

Hope this is clear.

//Kind regards, //

Regarding the prepaid insurance, is the total insurance expense $14,811.02? But the total repayments will be $17,499.48? Rather then putting the interest on funding to prepaid insurance, I would just bring in the net liability to the insurance funding liability account. When each repayment is made, the principal amount should be posted to the liability account, and the interest should be posted to an interest expense account. Regarding the amortisation of insurance – this should not necessarily be the same amount as the monthly repayment. It should just be the total of the prepaid insurance expense / the number of months. i.e. if it is $14,811.02 of prepaid insurance for the next 12 months, you would bring in $1,234.25 of expense each month.