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For each separate case, record the necessary adjusting entry.
a. On July 1, Lopez Company paid $1,400 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 $5,400 at the beginning of the year. During the year, it purchases $2,200 of supplies. As of December 31, a physical count of supplies shows $900 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 :

abiolataiwo2015

The year-end adjusting entries to reflect expiration of the insurance are: Debit Insurance expense $1,400; Credit Prepaid Insurance $1,400.

Journal entries:

Lopez Company Journal entries

a. July 1

Debit Insurance expense $1,400

Credit Prepaid Insurance $1,400

(To record prepaid insurance)

b. December 31

Debit Supplies expense $6,700

Credit Supplies $6,700

($5,400+$2,200-$900)

(To record supplies)

Inconclusion the year-end adjusting entries to reflect expiration of the insurance are: Debit Insurance expense $1,400; Credit Prepaid Insurance $1,400.

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