In December 2013, Kojak Insurance Co. received $500,000 in premiums for a two-ye

Question

In December 2013, Kojak Insurance Co. received $500,000 in premiums for a two-year property insurance policy. The company recorded the transaction by debiting cash and crediting insurance premium revenue for the full amount. An internal audit conducted in early 2014 flagged this transaction.

Kojak needs to correct an accounting error. Kojak has made a change in accounting principle, requiring retrospective adjustment. Kojak is required to adjust a change in accounting estimate prospectively. Kojak is not required to make any accounting adjustments.

Explanation / Answer

Kojak needs to correct an accounting error.

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