On July 1, Lopez Company paid $1,500 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 $5,600 at the beginning of the year. During the year, it purchased $2,300 of supplies. As of December 31, a physical count of supplies shows $950 of supplies available.

Required:
Prepare the adjusting journal entry to correctly report the balance of the Supplies account and the Supplies Expense account as of December 31, 2017.

Preparation of the adjusting journal entry to correctly report the balance of the Supplies account and the Supplies Expense account as of December 31, 2017.

Dr Supplies expense $6,950

Cr Supplies $6,950

($5,600+$2,300-$950)

(To record the balance of the Supplies account and the Supplies Expense account)

Beginning Supplies account balance $5,600

Add purchased $2,300

Less physical count of supplies $950

=$6,950