Avalon Company paid $4,400 cash for an insurance policy providing three years' protection against fire loss.This transaction could properly be recorded by a $4,400 debit to Unexpired Insurance and a $4,400 credit to Cash.

Question

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This is the correct journal entry to record the purchase of insurance. The debit to Unexpired Insurance reflects that the insurance has not yet expired and will be recognized as an expense over the three years of coverage. The credit to Cash reflects the cash payment made for the insurance policy.

Avalon Company Paid $4,400 Cash for an Insurance Policy Providing