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General Accounting Discussions: Journalize and adjusting

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    • CommentAuthorDiamond79
    • CommentTimeJan 31st 2010 edited
     
    On July 1, 2008, Spahn Co. pays $18,000 to Randle Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. For Spahn Co., journalize and post the entry on July 1 and the adjusting entry on December 31.

    Would this be correct?

    Date --- Account --- Debit --- Credit
    ---------------------------------------------------------------------
    July 1 --- Prepaid Insurance --- 18,000
    ----------- ------ Accounts Payable ---------- 18,000


    Dec 31 --- Insurance Expense --- 500
    ---------------- Prepaid Insurance ------------ 500



    Thank You in Advance!!!
    • CommentAuthorpk
    • CommentTimeFeb 3rd 2010
     
    Your entry is perfectly alright!!.

    No adjusting entry is required in Dec. as the prepaid accounts shows only the remaining portion pertaining to the next year.

    savin.yakeep@yahoo.com
    • CommentAuthorDiamond79
    • CommentTimeFeb 3rd 2010
     
    Thank You - pk

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