Final answer:
The correct adjusting entry for store supplies is to increase expenses by $17,200, which reflects the used supplies during the year. This entry decreases supplies and increases expenses, and complies with the matching principle of accounting. Option A is correct answer.
Step-by-step explanation:
When Wilkinson Co. purchased supplies for $25,800 and the actual year-end supplies amounted to $8,600, it indicates that $17,200 worth of supplies were used during the year. In monetary terms, we would say that $17,200 has been 'consumed' or 'expensed'. To reflect this in the financial records, an adjusting entry is needed to decrease supplies and increase expenses
Adjusting Entry for Supplies:
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- Debit Supplies Expense account for the amount of supplies used ($17,200).
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- Credit Supplies account for the same amount ($17,200).
Therefore, the correct answer to the question is A) increase expenses by $17,200. This adjustment is in accordance with the matching principle of accounting, which states expenses should be recorded in the period they are incurred in, rather than when they are paid for. This entry will reduce the net income as the expenses are recognized.
It is important to note that the entry does not involve Accounts Payable or directly affect net income, so options B) and D) are incorrect. Also, we do not merely decrease supplies by $8,600, as we need to account for the entire value of the supplies consumed, not just the ending balance, thus eliminating option C).