Question

On July 1, 2017, Lopez Company paid $2,600 for six months of insurance coverage. No adjustments have been made to the Prepaid Insurance account, and it is now December 31, 2017. Zim Company has a Supplies account balance of $7,800 on January 1, 2017. During 2017, it purchased $3,400 of supplies. As of December 31, 2017, a supplies inventory shows $1,500 of supplies available.
Required:
Prepare the journal 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, 2017.

Answer 1

Answer:

a.

Date                          Account Title                                       Debit           Credit

Dec. 31, 2017           Insurance expense                          $2,600

                                 Prepaid insurance                                                 $2,600

b.

Date                          Account Title                                       Debit           Credit

Dec. 31, 2017           Supplies Expense                               $9,700

                                  Supplies                                                                 $9,700

Working

Supplies = Beginning balance + Purchases - Closing balance

= 7,800 + 3,400 - 1,500

= $9,700