Chapter 3

(1)

Prepare year-end adjusting entries in T-accounts:

Office Supplies had a balance of $84 on January 1. Purchases debited to Office Supplies during the year amount to $415. A year-end inventory reveals supplies of $285 on hand.

(2)

Ragous Corporation paid $1,200 on January 2 for a one year insurance policy beginning on that date. If the end-of-January trial balance includes a $1,200 debit for Prepaid Insurance, and one month of a one year policy has expired at the date of the trial balance, what does this $1,200 represent? Show your work!

A. $100 of expense and $1,100 of an asset

B. $1,100 of expense and $100 of an asset

C. $100 of a liability and $1,100 of expense

D. $1,100 of a liability and $100 of expense