Question

For each separate case, record the necessary adjusting entry. On July 1, Lopez Company paid $2,800 for six months of insurance coverage. No adjustments have been made to the Prepaid Insurance account, and it is now December 31. Zim Company has a Supplies account balance of $8,200 at the beginning of the year. During the year, it purchased $3,600 of supplies. As of December 31, a physical count of supplies shows $1,600 of supplies available. Prepare the year-end adjusting entries to reflect expiration of the insurance and correctly report the balance of the Supplies account and the Supplies Expense account as of December 31.

Answer 1

a. Date Account Title and Explanation Debit Credit

Insurance Expenses $2,800

Prepaid Insurance $2,800

(To record 6-month Insurance coverage expired)

b. Date Account Title and Explanation Debit Credit

Supplies Expenses $10,200

Supplies $10,200

(8,200 +3,600 - 1,600)

(To record supplies consumed during the year)