Question

A) On July 1, Lopez Company paid $3,200 for six months of insurance coverage. No adjustments have been made to the Prepaid Insurance account, and it is now December 31.

b) Zim Company has a Supplies account balance of $9,000 at the beginning of the year. During the year, it purchased $4,000 of supplies. As of December 31, a physical count of supplies shows $1,800 of supplies available.
Required:
Prepare the journal entries to reflect the expiration of the insurance and correctly report the balance of the Supplies account and the Supplies Expense account as of December 31.

Answer 1

Below are the Journal entries for Lopez Company as of December 31.

Step-by-step explanation:

a) Date: December 31

Debit: Insurance Expense $3,200

Credit: Prepaid Insurance $3,200

To record Insurance Expense.

b) Date: December 31

Debit: Supplies Expense $11,200

Credit: Supplies $11,200

To record Supplies Expense.

Supplies on December 31 can be calculated as follows:

Supplies = Opening Supplies + Purchases - Closing Supplies

Supplies = $9,000 + $4,000 - $1,800

Supplies = $11,200