Assignment Problem: Accounting for prepayments.
A food distributor reported ending balances in Pre payments of €30.7 million, €25.8 million, and €42.1 million for the years ended.
December 31, 2012, 2011, and 2010, respectively. Assume that Prepayments pertain to insurance premiums on warehouses and merchandise.
During each of the three years, the firm paid insurance premiums of €50 million. The firm follows IFRS and reports its results in millions of Euros (€).
Q1. What journal entries did the food distributor make in each of the three years to recognize prepayments?
Q2. What journal entries did the firm make in 2011 and 2012 to recognize insurance on its warehouse and inventory?
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