Question

Gumbo Shrimp, Inc. started the month of June with supplies on hand of $2,000. It purchased $800 of supplies. At the end of June, $1,300 of supplies were left. What adjusting journal entry should be made on June 30?

a. Debit Supplies Expense for $1,300 and credit Supplies for $1,300
b. Debit Supplies Expense for $1,500 and credit Supplies for $1,500
c. Debit Supplies for $800 and credit Cash for $800
d. Debit Supplies for $700 and credit Supplies Expense for $700
e. Debit Supplies for $1,300 and credit Supplies Expense for $1,300

Answer 1

The correct answer is B. The correct adjusting journal entry is to debit Supplies Expense for $1,500 and credit Supplies for $1,500, reflecting the usage of supplies that Gumbo Shrimp, Inc. experienced during June.

Step-by-step explanation:

To determine the proper entry, we start by calculating the total supplies used during June. At the beginning of the month, the business had $2,000 in supplies, and it purchased an additional $800 worth, totaling $2,800 in supplies available. Since there was $1,300 of supplies left at the end of the month, the business must have used $1,500 worth of supplies (computed as $2,800 available - $1,300 left).

The accounting entry to record the consumption of supplies is to increase (debit) Supplies Expense and decrease (credit) Supplies for the amount used, which in this case is $1,500. Therefore, the correct journal entry is to debit Supplies Expense for $1,500 and credit Supplies for $1,500, representing the usage of supplies throughout the month.