On July 1, 2019, Cullumber Company pays $12,000 to Kalter Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. For Cullumber Company, journalize and post the entry on July 1 and the annual adjusting entry on December 31. For Blossom Company, journalize and post the entry on July 1 and the annual adjusting entry on December 31.

Explanation:

On July 1, 2019, Cullumber Company pays $12,000 to Kalter Insurance Co. for a 3-year insurance contract.

For Cullumber Company:

July 1 Debit:Prepaid Insur $12000

Credit: Bank. $12,000

Being payment for prepaid Insurance.

Dec 31. Credit:prepaid insur $2,000

Debit:Insurance exp $2,000

Being insurance expenses for the year.

For Blossom Company:

July 1 Credit:Unearned Revenue $12000

Debit: Bank. $12,000

Being unearned revenue on Insurance.

Dec 31. Debit:unearned revenue $2,000

Credit: Revenue $2,000

Being insurance revenue for the year.

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