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

Answer:

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)