On June 1, 2014, Cole Corporation paid $8,400 to purchase a 24-month insurance policy. Assume that Cole

Question:

On June 1, 2014, Cole paid $8,400 to purchase a 24-month insurance policy. Assume that Cole records the purchase as an asset and that the books are closed on December 31.

Required
a. Show the purchase of the insurance policy and the related adjusting entry to recognize insurance expense in the accounting equation.
b. Assume that Cole failed to record the adjusting entry to reflect the expiration of insurance. How would the error affect the company’s 2014 income statement and balance sheet?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...