QS $3-7($Algo$)$ Adjusting prepaid $($deferred$)$ expenses LO P$1$

For each separate case, record the necessary adjusting entry.

a$.$ On July $1,$ Lopez Company paid $$2,700$ 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 $$8,000$ at the beginning of the year. During the year, it purchases $$3,500$ of supplies. As of December $31,$ a physical count of supplies shows $$1,550$ 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 $31.$