Question

On July 1, 2020, Marigold Corp. pays $13,200 to Kalter Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. For Marigold Corp., journalize and post the entry on July 1 and the annual adjusting entry on December 31.
For Dobbs Co., journalize and post the entry on July 1 and the adjusting entry on December 31.

Answer 1

Answer:

For Marigold

The journal entries on July 1 , 2020 are:

Dr Insurance prepayment   $13,200

Cr Cash                                              $13,200

being insurance paid for in advance

The adjusting entry at the close of the year

Dr Insurance expense        $2,200

Cr Insurance prepayment                $2,200

Being insurance expense incurred in the year

The other party is Kalter insurance not Dobbs Co:

he journal entries on July 1 , 2020 are:

Dr Cash                              $13,200

Cr Prepaid revenue                    $13,200

being revenue received in advance

The adjusting entry at the close of the year

Dr Prepaid revenue        $2,200

Cr Revenue                                   $2,200

Being recognition earned in the year

Explanation:

Upon the payment of the insurance , the cash account of the paying company is credited and that of the receiving company debited .

The other entry in the paying company is insurance prepayment while that of the receiving company is prepaid revenue .