Prustate Insurance Company collected $240,000 from Jacobs Printing Corporation for a two-year fire insurance policy on May 31, 2017. The policy is in effect from June 1, 2017, to May 31, 2018.

REQUIRED:
a. Assume that Prustate Insurance Company recorded the $240,000 cash collection as a liability on May 31, 2017.
1. Prepare the entry to record the cash collection.
2. Prepare the adjusting entry necessary on December 31, 2017.
3. What was the purpose of the adjusting journal entry on December 31, 2017?
4. Complete a chart like the following:

b. Assume that Jacobs Printing Corporation recorded the $240,000 cash payment as an asset on May 31, 2017.
1. Prepare the entry to record the cash payment.
2. Prepare the adjusting entry necessary on December 31, 2017.
3. What was the purpose of the adjusting journal entry on December 31, 2017?
4. Complete a chart like the following:

Transcribed Image Text:

2019 Total 2017 2018 Insurance revenue Cash receipts associated with insurance 2019 2017 2018 Total Insurance expense Cash payments associated with insurance