Question

During s first three months of operations, Cari’s Bakery, Inc. purchased supplies such as plates, napkins, bags, and cutlery for $9,000 and recorded this as supplies inventory. Supplies on hand at the end of the first quarter, amount to $5,600. To prepare financial statement for the first quarter, the company must record which of the following accounting adjustments? Select one:

A. Increase Supplies expense by $5,600 and decrease Supplies inventory by $5,600

B. Increase Supplies expense by $3,400 and decrease Supplies inventory by $3,400

C. Increase Supplies inventory by $5,600 and decrease Supplies expense by $5,600

D. Increase Supplies inventory by $3,400 and decrease Supplies expense by $3,400

E. None of the above

Answer 1

B. Increase Supplies expense by $3,400 and decrease Supplies inventory by $3,400

Step-by-step explanation:

The adjusting entry is shown below:

Supplies expense A/c Dr $3,400

To Supplies inventory A/c $3,400

(Being supplies account is adjusted)

The supplies expense is computed by

= Beginning balance + purchase - supplies on hand

= $0 + $9,000 - $5,600

= $3,400

We simply debited the supplies expense account and credited the supplies account