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A company purchase prepaid insurance on January 10th for $11,000. do you need a journal entry...

A company purchase prepaid insurance on January 10th for $11,000. do you need a journal entry on January 31st to record expired insurance? If so what is the journal entry?

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Answer #1

Requirement:- A company purchase prepaid insurance on January 10th for $11,000. do you need a journal entry on January 31st to record expired insurance?

Solution:-

Journal entry on January 10

Date Account Titles and Explanation Debit Credit
Jan 10 Prepaid Insurance $11,000
      Cash $11,000

Yes, We need to record Journal entry on January 31.

Date Account Titles and Explanation Debit Credit
Jan 31 Insurance Expense $633
     Prepaid Insurance $633

Note: While calculating the insurance expense, we are assuming $11,000 insurance is of full year or 365 days.

Insurance expense = 11,000 * 21 / 365 = 633

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