Question

In: Accounting

On July 1, 2017, Oriole Co. pays $13,740 to Waterway Insurance Co. for a 3-year insurance...

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.

Solutions

Expert Solution

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.


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