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.)

Question

Business

Byron Snyder

20 February, 16:54

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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Kierra Smith · Answer 1

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