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24 October, 06:03

n July 1, 2017, Sheridan Company pays $12,500 to Oriole Company for a 2-year insurance contract. Both companies have fiscal years ending December 31. Collapse question part (a) For Sheridan Company, journalize the entry on July 1 and adjusting entry on December 31. (Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

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  1. 24 October, 07:44
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    The journal entries are shown below:

    July 1: Prepaid insurance A/c Dr $12,500

    To Cash A/c $12,500

    (Being advance insurance is paid in cash)

    July 31: Insurance expense A/c $3,125

    To Prepaid insurance $3,125

    (Being adjusted entry made)

    The calculation of insurance expense is shown below:

    = (Insurance : total number of months in a two year) * number of months

    = ($12,500 : 24 months) * 6 months

    = $3,125
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