In: Accounting
On July 1, 2017, Oriole Co. pays $13,740 to Waterway Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. Journalize the entry on July 1 and the adjusting entry on December 31 for Waterway Insurance Co. Waterway uses the accounts Unearned Service Revenue and Service Revenue.
Answer :- Journal entries
Date | General journal | Debit ($) | Credit ($) |
July 1, 2017 |
Prepaid insurance A/c Dr. To Cash A/c |
13740 |
13740 |
December 31, 2017 |
Insurance expense A/c Dr. To Prepaid insurance A/c |
2290 |
2290 |
(0.50 * 13740 / 3 = $ 2290).
Note :- Six months can also be written as 0.50 i.e., 6 / 12.