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.

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

Zim Company:

During the year:

1. Debit Supplies $2,000

Credit Cash $2,000

December 31:

2. Debit Supplies Expense $6,200

Credit Supplies $6,200

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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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

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