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    kmanda99's Avatar
    kmanda99 Posts: 2, Reputation: 1
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    #1

    Dec 11, 2011, 08:25 PM
    Adjusting Journal Entry
    What would the adjusting journal entry be... On 7/1/10, Cardinal purchased a three-year fire insurance policy for $30,000 paying the full amount on that day. Cardinal recorded the $30,000 in General & Administrative Expense.
    Sordil's Avatar
    Sordil Posts: 3, Reputation: 1
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    #2

    Dec 11, 2011, 10:07 PM
    Debit Prepaid Insurance for $30,000 and Credit Cash for $30,000
    Each month, the prepaid insurance is amortized or expensed at the rate of 1/36 x $30,000 = $833.33
    So, at 12/31, you would have Prepaid Insurance of $25,000 and insurance expense of $5,000 (6x$833.33)
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    Sordil Posts: 3, Reputation: 1
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    #3

    Dec 11, 2011, 10:09 PM
    Sorry, Credit General & Administrative for $30,000... not cash... I didn't see that part initially.
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