Explanation Adjusting entries: Adjusting entries are the journal entries which are recorded at the end of the accounting period to correct or adjust the revenue and expense accounts, to concede with the accrual principle of accounting. a. Prepare the adjusting entry to record the prepaid insurance. Date Accounts title and explanation Post Ref. Debit ($) Credit ($) January 31 Insurance Expense (E–) 190 Prepaid Insurance(A–) (1) 190 (To record the adjusting entry for prepaid insurance) Table (1) Insurance expense is an expense and it decreases the stockholders’ equity account. Therefore, debit insurance expense with $190. Prepaid Insurance is an asset account and it is decreased. Therefore, credit the prepaid insurance with $190. Working note: Calculate the amount of prepaid insurance expired during January: Prepaid insurance = Insurance amount paid Number of months = $ 6 , 840 36 Months = $ 190 (1) b. Prepare the adjusting entry to record the supplies expenses. Date Accounts title and explanation Post Ref. Debit ($) Credit ($) January 31 Supplies Expense (E–) 1,125 Office Supplies (A–) (2) 1,125 (To record the adjusting entry for the amount of office supplies used during the period) Table (2) Supplies expense is an expense and it decreases the stockholders’ equity account. Therefore, debit supplies expenses with $1,125. Office Supplies is an asset and it is decreased. Therefore, credit supplies with $1,125. Working note: Calculate the amount of office supplies used during the year: Office supplies used = ( Amount of supplies during the year − Closing balance ) = $ 2 , 100 − $ 975 = $ 1 , 125 (2) c. Prepare the adjusting entry to record the depreciation expense

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Prepare the adjusting entries for Incorporation IP as on January 31.

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