Question

On July 1m 2017, Ling Co. pays $12,400 to Marsh Insurance Co., for a 2-year insurance contract. Both companies have fiscal years ending December 31.
For Ling Col journalize the entry on July 1 and adjusting entry on December 31,

Date Account Title and Explanation Debit Credit

Answer 1

Answer:

Journal entries

Explanation:

The journal entries are as follows

On July 1

Prepaid insurance Dr $12,400

     To Cash $12,400

(Being the payment is recorded)

On December 31

Insurance expense Dr $3,100

    To Prepaid insurance $3,100

(Being the insurance expense is recorded)

It is computed below:

= $12,400 × 6 months ÷ 24 months

= $3,100