Page 7 Outline Chapter 4 1. Prepaid Expenses Examples: Supplies: Purchased $10,000 worth of supplies on 12/1. On 12/31 you perform an end A. of the month count and supplies on hand are worth $4,500. Original journal entry to record purchase of supplies: On 12/31 you need to determine how much consumed Adjusting Journal entry on 12/31 If adjusting entry hadn't been made Insurance Example -Bought a 12 month insurance policy for $1200 cash on 1/1. B. Original Journal Entry on 1/1: At 1/31 you one month of that policy has expired, so you need to prepare an adj. Entry. Analysis shows $100 will expire each month. Adjusting entry on 1/31