Question

Foley Advertising Co's trial balance at Dec. 31 shows Supplies $8,800 and Supplies Expense $0. On December 31, there are $1,100 of Supplies on hand. What is the adjusting entry?

a. Debit Supplies Expense $1,100; Credit Supplies $1,100

b. Debit Supplies $1,100; Credit Supplies Expense $1,100

c. Debit Supplies Expense $7,700; Credit Supplies $7,700

d. Debit Supplies $7,700; Credit Supplies Expense $7,700

Answer 1

The appropriate adjusting entry for the supplies is to debit Supplies Expense for $7,700 and credit Supplies for $7,700, thereby matching the expense with the period in which it is incurred and reflecting the correct amount of supplies remaining. Option c.

Step-by-step explanation:

The correct adjusting entry to record the supplies expense for Foley Advertising Co, given that the trial balance shows Supplies at $8,800 and there are $1,100 of Supplies on hand at the end of the period, would be option c. Here's how you calculate it:

The company started with $8,800 in supplies and ended with $1,100. The amount used is $8,800 - $1,100 = $7,700. Therefore, you need to Debit Supplies Expense for $7,700 to record the supplies used during the period and Credit Supplies for $7,700 to reduce the balance in the Supplies account to the amount actually on hand.

The adjusting entry is thus:
Debit Supplies Expense $7,700;
Credit Supplies $7,700. Option c.