Final answer:
The general fund journal entries for acquiring supplies would involve debiting Supplies Inventory and crediting Accounts Payable when acquired, and debiting Supplies Expense and crediting Supplies Inventory for consumed supplies. The end-of-year accounting profit would be calculated by subtracting total costs from sales revenue, resulting in an accounting profit of $50,000 for the firm.
Step-by-step explanation:
The student's question involves preparing the necessary journal entries for Iron City's general fund when accounting for supplies using the consumption method. With this method, supplies are recorded as an expense when they are used rather than when they are purchased.
On November 4, 20X1, the acquisition of supplies would be recorded as:
- Dr. Supplies Inventory $2,300
- Cr. Accounts Payable $2,300
At the end of the fiscal year, on December 31, 20X1, the supplies still on hand are given as $1,140. The adjustment to reflect the consumed supplies would be:
- Dr. Supplies Expense ($2,300 - $1,140)
- Cr. Supplies Inventory ($2,300 - $1,140)
The closing entry to zero out the expenses and revenues for the fiscal year end would usually follow, but the closing entry details are not provided in the question.
To calculate the accounting profit, we follow this formula:
- Accounting Profit = Sales Revenue - (Labor Costs + Capital Costs + Materials Costs)
Applying this calculation to the provided figures:
- Accounting Profit = $1,000,000 - ($600,000 + $150,000 + $200,000)
- Accounting Profit = $1,000,000 - $950,000
- Accounting Profit = $50,000