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5 March, 15:23

For each separate case, record the necessary adjusting entry. On July 1, Lopez Company paid $1,200 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 $5,000 at the beginning of the year. During the year, it purchased $2,000 of supplies. As of December 31, a physical count of supplies shows $800 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.

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  1. 5 March, 15:36
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    The adjusting entries are shown below:

    1. Insurance expense A/c Dr $1,200

    To Prepaid insurance A/c $1,200

    (Being prepaid insurance is adjusted)

    2. Supplies expense A/c Dr $6,200

    To supplies A/c $6,200

    (Being supplies adjusted)

    The supplies at the end of the year is computed below:

    = Supplies account balance + purchase of supplies - available supplies

    = $5,000 + $2,000 - $800

    = $6,200
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