Accounting Treatment Consultation for Insurance Installment Payments and Third-Party Financing
The user consults on an insurance policy with a total value of $85,000, a down payment of $23,000, and the remaining $62,000 financed through a third party, with financing fees of $2,000, paid in 9 monthly installments of $7,111.11. The article outlines the relevant accounting treatment approach and invites feedback from peers.
Hello,
First, thank you for attempting to answer my question. I appreciate this platform, which has helped me with many accounting-related queries. Before asking, I did some preliminary research, but I haven't found an answer that fully matches my situation.
Problem Background
I have an insurance policy with a total value of $85,000, effective July 12, 2018. The payment arrangement is as follows:
- Down payment amount: $23,000
- Amount financed through a third party: $62,000
- Financing fee: $2,000
- Total payment: $64,000
The payment plan starts on August 12, 2018, with monthly payments of $7,111.11 for 9 months.
My Confusion
For the accounting entries of this transaction, I have considered various treatments, but I've confused myself. I would appreciate any help or feedback on the relevant journal entries.
Note: All amounts are in USD, and dates are in MM/DD/YYYY format.
Thank you for your help!