Company Inc. paid insurance of $48,000 for April 1,2020 - March 31, 2021 in advance. How...
Company Inc. paid insurance of $48,000 for April 1,2020 - March 31, 2021 in advance. How should Landing record this transaction? How should they record the adjusting entry on Dec 31, 2020?
Homework Answers
The following journal entry will be made on April 1, 2020 to record prepaid insurance.
| Date | General journal | Debit | Credit |
| April 1, 2020 | Prepaid insurance | $48,000 | |
| Cash | $48,000 |
The following journal entry will be made to record the adjusting entry on December 31, 2020:
| Date | General journal | Debit | Credit |
| December 31, 2020 | Insurance expense | $36,000 | |
| Prepaid insurance | $36,000 |
Insurance expense for 1 year = $48,000
Insurance expense for 9 months (from April 1 to December 31) = 48,000 x 9/12
= $36,000
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