XYZ Company is a large supplier of auto parts. Assume that XYZ had €62.4 million of prepaid expenses on January 1, 2012. This item mainly consists of prepayments of rent, leasing fees, interest, and insurance premiums. Assume all these prepayments were for services that XYZ used during 2012 and that XYZ spent €164 million in cash during 2012 for rent, leasing fees, and interest, of which €38 million was a prepayment of expenses for 2013.
1. Prepare a journal entry recognizing the use of the €62.4 million of prepaid expenses during 2012.
2. Prepare a compound journal entry for the cash payment of €164 million for rent, leasing fees, interest, and insurance premiums during 2012; proper amounts going to expense & prepaid expenses.