Question

Prepaid Expense At the beginning of the quarter, a company had $2,670 of supplies on hand. During the period, the company purchased $500 worth of supplies. At the end of the year, on December 31, the supplies on hand are $1,220. How much of an adjustment should the company make to show the use of the supplies?

Answer 1

To calculate the adjustment for the use of supplies, subtract the supplies on hand at the end of the period from the total supplies available at the beginning and add the supplies purchased during the period.

Step-by-step explanation:

Calculating the adjustment for the use of supplies involves assessing the total supplies consumed during a specific period. This adjustment is crucial for accurately reflecting the financial status and expenses of a company. The formula for determining the total supplies used is based on the changes in supplies quantity over the accounting period.

To calculate the total supplies used, one must consider the supplies on hand at the beginning of the period, add the supplies purchased during the period, and then subtract the supplies on hand at the end of the period. The formula is represented as follows:

Applying this formula to a specific scenario, where supplies on hand at the beginning are $2,670, supplies purchased amount to $500, and supplies on hand at the end are $1,220:

Therefore, the company should make an adjustment of $1,950 to accurately reflect the consumption or use of supplies during the specified period. This adjustment ensures that the financial statements provide a faithful representation of the company's resources and expenses, contributing to sound financial reporting and decision-making.