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Jounal entry for insurance payment

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On July 1, 2006, Orlow Co. pays $12,000 to Pizner Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. For Orlow Co., journalize and post the entry on July 1 and the adjusting entry on December 31.

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Solution Summary

The solution explains the journal entry for making the insurance payment and the period end adjusting entry

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On July 1 the entire amount would be recorded as prepaid insurance. The entry is

July 1 Prepaid Insurance Dr 12,000
...

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