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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?

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Answer #1

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

Kindly comment if you need further assistance. Thanks‼!

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