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Hello,
My company maintains an insurance policy for with (using round numbers) a down payment of $450K, followed by 8 additional monthly installments of $50K.
This policy runs from October 1st, 2014 through July 2015. My boss is stating that we should record this as an accrual with an offsetting prepaid expense and amortize the prepaid down as we make payments. However, then at year-end, we will have $350K of a prepaid expense for which we have not yet paid. Of course, the accrual will be offsetting, however there is still no asset as far as I can tell.
Should I plan to record this as a prepaid, or should I suggest that we only record the expense as the installments are paid?
Thanks in advance, and happy closing to all.
My company maintains an insurance policy for with (using round numbers) a down payment of $450K, followed by 8 additional monthly installments of $50K.
This policy runs from October 1st, 2014 through July 2015. My boss is stating that we should record this as an accrual with an offsetting prepaid expense and amortize the prepaid down as we make payments. However, then at year-end, we will have $350K of a prepaid expense for which we have not yet paid. Of course, the accrual will be offsetting, however there is still no asset as far as I can tell.
Should I plan to record this as a prepaid, or should I suggest that we only record the expense as the installments are paid?
Thanks in advance, and happy closing to all.