Answered: how is the 12/31 amount $3,350

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On July 1, 2020, Tamarisk, Inc. pays $20,100 to Kalter Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31.

For Tamarisk, Inc., journalize and post the entry on July 1 and the annual adjusting entry on December 31.

7/31 Dr - Prepaid Insurance/Cr - Cash $20,100

12/31 Dr - Insurance Expense/Cr Prepaid Insurance $3,350

My question is- how is the 12/31 amount $3,350?

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