On July 1, 2014, Pizner Co. pays $28,200 to Orlow Insurance Co. for a 3-year ins

Question

On July 1, 2014, Pizner Co. pays $28,200 to Orlow Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31.

Journalize and post the entry on July 1 and the adjusting entry on December 31 for Orlow Insurance Co. Orlow uses the accounts Unearned Service Revenue and Service Revenue. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit July 1Dec. 31 July 1Dec. 31

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Part A:

July 1 2014

Cash Dr. 28200

Unearned Service Revenue Cr. 28200

(Received Cash from Pizner Co for future services)

Dec 31 2014

Unearned Service Revenue (28200*36 months/6months) Dr. 4700

Service Revenue Cr. 4700

(Revenues earned recorded)

Part B:

Thanks.

Unearned Service Revenue Dec 31 4,700 Jul 1 28,200 Bal. 23,500

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