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3 March, 07:29

On July 1, 2020, Dobbs Co. pays $14,400 to Kalter Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. For Dobbs Co., journalize and post the entry on July 1 and the annual adjusting entry on December 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

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  1. 3 March, 10:37
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    The journal entries are as follows:

    On July 1, 2020

    Prepaid insurance Dr $14,400

    To Cash $14,400

    (Being the cash paid for insurance is recorded)

    On December 31, 2020

    Insurance expense Dr $2,400

    To Prepaid insurance $2,400

    (Being the insurance expense is recorded)

    It is computed below:

    = $14,400 * 6 months : 36 months

    = $2,400

    Prepaid Insurance

    July 31 $14,400 December 31 $2,400

    December 31'

    Balance $12,000

    Insurance expense

    December 31 $3,600
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