Question

Dreamtime Laundry purchased $7,000 worth of supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is

a. Debit Supplies Expense, $2,000; Credit Supplies, $2,000.

b. Debit Supplies, $2,000; Credit Supplies Expense, $2,000.

c. Debit Supplies, $5,000; Credit Supplies Expense, $5,000.

d. Debit Supplies Expense, $5,000; Credit Supplies, $5,000

Answer 1

The correct option is D.

Explanation:

Given information:

On June 2 : Dreamtime Laundry purchased $7,000 worth of supplies.

On June 30 : An inventory of the supplies indicated only $2,000 on hand.

The adjusted amount is

`\$7,000-\$2,000=\$5,000`

To adjust the amount we need to debit Supplies Expense by $5000 and credit Supplies by $5,000.

So, the required adjusting entry that should be made by the company on June 30 is

Supplies Expense $5,000

Credit Supplies $5,000

Therefore, the correct option is D.