On July 1, 2010, Spahn Co. pays $18,000 to Randle Insurance Co. for a 3-year ins
ID: 2386510 • Letter: O
Question
On July 1, 2010, Spahn Co. pays $18,000 to Randle Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. Prepare the journal entry on July 1 and the adjusting entry on December 31 for Randle Insurance Co.
Date Account/Description Debit Credit
July 1 Unearned Insurance RevenuePrepaid InsuranceCashInsurance RevenueAccounts PayableInsurance ExpenseAccounts ReceivableAccrued Insurance
CashAccrued InsuranceAccounts ReceivableInsurance RevenueInsurance ExpenseUnearned Insurance RevenuePrepaid InsuranceAccounts Payable
Dec. 31 CashAccounts PayableUnearned Insurance RevenueInsurance ExpenseAccrued InsuranceAccounts ReceivablePrepaid InsuranceInsurance Revenue
Insurance RevenueAccounts ReceivableAccounts PayableAccrued InsuranceCashUnearned Insurance RevenueInsurance ExpensePrepaid Insurance
Using T accounts, enter the balances in the accounts below, post the adjusting entry as necessary, and indicate the adjusted balance in each account. (If there is no transaction, enter NA as the date and 0 for the amount. Do not leave any fields blank.)
Unearned Insurance Revenue
Dec. 31July 1NA NAJuly 1Dec. 31
12/31 Bal. 12/31 Bal.
Insurance Revenue
Dec. 31July 1NA July 1NADec. 31
Explanation / Answer
7/1/2010
Dr. Cash $18,000
Cr. Unearned Insurance Revenue $18,000
12/31/2010
Dr. Unearned Insurance Revenue $3,000 ($18,000 * 6/36)
Cr. Insurance Revenue $3,000
Unearned Insurance Revenue 12/31 Balance = $15,000 ($18,000 - $3,000)
Insurance Revenue 12/31 Balance = $3,000
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