Question

A. On July 1, Lopez Company paid $2,200 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 $7,000 at the beginning of the year. During the year, it purchased $3,000 of supplies. As of December 31, a physical count of supplies shows $1,300 of supplies available.

Required:
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

Answer and Explanation:

The Journal entries are shown below:-

1. Insurance expenses Dr, $2,200

        To Prepaid insurance $2,200

(Being insurance coverage expired is recorded)

2. Supplies expenses Dr, $11,300 ($7,000 + $3,000 + $1,300)

         To Supplies $11,300

(Being supplies expenses is recorded)

These two entries should be considered