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Problem
On May 1, 20X0, your company takes out a 2-year insurance policy for $2,400 a year and prepays the entire $4,800, recording the amount as an expense. At year-end 20X0, you discover an adjusting entry defers $3,600 of insurance expense.
a. What is the correcting journal entry?
b. If no correcting journal entry is recorded, how are the 20X0 income statement and balance sheet, respectively, affected?
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