Question

A company purchased office supplies costing $5700 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1030 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

A. debit Supplies Expense, $4670; credit Supplies, $4670.
B. debit Supplies, $4670; credit Supplies Expense, $4670.
C. debit Supplies Expense, $6730; credit Supplies, $6730.
D. debit Supplies, $1030; credit Supplies Expense, $1030.

Answer 1

A. debit Supplies Expense, $4670; credit Supplies, $4670.

Step-by-step explanation:

Lets consider the opening balance in the supplies account to be zero.

The purchase of supplies worth 5700 cause a debit balance in the suppies account and the the supplies account is debited by 5700. During the year the supplies are consumed and at the end, the adjusting entry is made. The supplies account have a remaining balance of 1030.

This means that during the year, supplies worth 4670 (5700 - 1030) have been consumed and should be charged as an expense and reduced in the supplies account.

The entry for such an event is,

Supplies expense 4670 Dr

Supplies account 4670 Cr