Questions: On December 1, a company pays 3,600 for a 36-month insurance policy. After one month, accrual accounting requires (100 / 3,600) of insurance expense be reported on the income statement ending December 31. However, if cash basis accounting is used, (100 / 3,600) of insurance expense would be reported at the time of purchase.

To solve this problem, we need to understand the difference between accrual accounting and cash basis accounting.

1. Accrual Accounting:

   • Under accrual accounting, expenses are recognized when they are incurred, regardless of when the cash is paid.
   • The company pays $3,600 for a 36-month insurance policy, which means the monthly insurance expense is $3,600 / 36 = $100.
   • After one month, the company should report $100 of insurance expense on the income statement for December.

2. Cash Basis Accounting:

   • Under cash basis accounting, expenses are recognized when the cash is actually paid.
   • Since the company paid $3,600 upfront for the insurance policy, the entire amount would be reported as an expense at the time of purchase.

Now, let's fill in the blanks:

• For accrual accounting, the blank should be filled with $100, as this is the amount of insurance expense recognized after one month.
• For cash basis accounting, the blank should be filled with $3,600, as this is the amount recognized at the time of purchase.

Therefore, the completed statement is:

On December 1, a company pays $3,600 for a 36-month insurance policy. After one month, accrual accounting requires $100 (100 / 3,600) of insurance expense be reported on the income statement ending December 31. However, if cash basis accounting is used, $3,600 (100 / 3,600) of insurance expense would be reported at the time of purchase.