19. one september 10, company a buys a one - year liability insurance policy for $2,400 cash. the coverage…
19. one september 10, company a buys a one - year liability insurance policy for $2,400 cash. the coverage begins on september 15. please provide the journal entry at the time of the purchase of the policy.
Answer
Explanation:
Step1: Identify the accounts involved
When the company purchases the insurance policy in advance, it creates a prepaid asset. Cash is being paid out. Debit Prepaid Insurance $2,400; Credit Cash $2,400.
Answer:
| Account Title | Debit ($) | Credit ($) |
|---|---|---|
| Prepaid Insurance | 2,400 | |
| Cash | 2,400 |