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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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Answer:

Explanation:

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

anthougo

The preparation of the year-end adjusting entries as of December 31 in the accounts are as follows:

Adjusting Journal Entries:

December 31:

Lopez Company:

1. Debit Insurance Expense $1,200

Credit Prepaid Insurance $1,200

  • To record the insurance expense for the year.

Zim Company:

During the year:

1. Debit Supplies $2,000

Credit Cash $2,000

  • To record purchase of supplies.

December 31:

2. Debit Supplies Expense $6,200

Credit Supplies $6,200

  • To record the supplies expense for the year.

Data and Analysis:

December 31:

Lopez Company:

1. Insurance Expense $1,200 Prepaid Insurance $1,200

Zim Company:

1. Supplies $2,000 Cash $2,000

2. Supplies Expense $6,200 Supplies $6,200

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