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2 years ago

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On July 1, 2022, Sandhill Co. pays $22,000 to Cullumber Company for a 2-year insurance contract. Both companies have fiscal year

s ending December 31.
Required:
Journalize the entry on July 1 and the adjusting entry on December 31 for Cullumber Company.

1 answer:

drek231 [11]2 years ago

8 0

Answer:

Dr Prepaid insurance 22,000

Cr cash 22,000

Dr Insurance expense 5,500

Cr Prepaid insurance 5,500

Explanation:

Preparation of Journal entries

Based on the information given we were told that Sandhill Company pays the amount of $22,000 to another company which is Cullumber Company for a 2-year insurance contract in which Both the companies have fiscal years that is ending December 31 which means that the Journal entry will be recorded as:

Dr Prepaid insurance 22,000

Cr cash 22,000

Dr Insurance expense 5,500

Cr Prepaid insurance 5,500

[(22,000*6/12)/2]

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