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On July 1, 2020, Pearl Co. pays $13,620 to Martinez 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
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On July 1, 2020, Pearl Co. pays $13,620 to Martinez 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 Martinez Insurance Co. Martinez uses the accounts Unearned Service Revenue and Service Revenue.

User Jeff Breadner
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6 votes

Answer:

Step-by-step explanation:

The journal entry is shown below:

1st July Debit Prepaid insurance $13620

Credit Cash $13620

31st December Debit Insurance expenses $2270

Credit Prepaid insurance $2270

Insurance expense was calculated as:

= $13620/3 years × 6months/12months

= $4540 × 1/2

= $2270

User Ganesh Kamath
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