Fact Pattern #$1$

Company A buys casualty insurance from Insurer Co$.$ The insurance premium is $$24,000$ for the year $($$$2,000$ per month$).$ Company A signs the casualty insurance policy on June $1,$ Year $1,$ for the one$-$year period from June $1,$ Year $1$ through May $31,$ Year $2.$ Both Company A and Insurer Co$.$ report on financial years ending December $31.$ Both Company A and Insurer Co$.$ record adjusting journal entries only at the end of their respective financial years.

Under the terms of the insurance policy, Company A is required to pay $($somewhat unrealistically$)$ its entire insurance premium with a single $$24,000$ payment at the beginning of the insurance policy term $($i$.$e$.,$ June $1,$ Year $1).$ Company A pays the $$24,000$ insurance premium in cash on June $1,$ Year $1.$

Question $2$ Needs Answer

Question $2(5$ points$)$

Retake question

On December $31,$ Year $1,$ Insurer Co$.$ will make an adjusting journal entry reflecting the following:

Question $2$ options:

Credit Insurance Revenue for $$24,000.$

Based on the facts, Insurer Co$.$ will not need to make an adjusting journal entry on December $31,$ Year $1,$ to account for revenue earned under the insurance policy with Company A during Year $1.$

Credit Insurance Receivable for $$14,000.$

Debit Prepaid Insurance Revenue for $$14,000.$

Question $4$ Needs Answer

Question $4(5$ points$)$

Retake question

On June $1,$ Year $1,$ Insurer Co$.$ will make an operating journal entry reflecting the following:

Question $4$ options:

Credit Insurance Revenue for $$24,000.$

Based on the facts, Insurer Co$.$ will not need to make an operating journal entry on June $1,$ Year $1.$

Credit Prepaid Insurance Revenue for $$24,000.$

Credit Insurance Receivable for $$24,000.$

Question $5$ Needs Answer

Question $5(5$ points$)$

Retake question

On December $31,$ Year $1,$ Company A will make an adjusting journal entry reflecting the following:

Question $5$ options:

Based on the facts, Company A will not need to make an adjusting journal entry on December $31,$ Year $1,$ to account for insurance expenses accrued under the insurance policy with Insurer during Year $1.$

Credit Insurance Payable for $$14,000.$

Credit Prepaid Insurance Expense for $$14,000.$

Debit Insurance Expense for $$24,000.$

Question $6$ Needs Answer

Question $6(5$ points$)$

Retake question

On May $31,$ Year $2,$ Insurer Co$.$ will make an operating journal entry reflecting the following:

Question $6$ options:

Debit Prepaid Insurance Revenue for $$10,000.$

Debit Insurance Revenue for $$10,000.$

Based on the facts, Insurer Co$.$ will not need to make an operating journal entry on May $31,$ Year $2.$

Credit Insurance Receivable for $$10,000.$