Question

The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $1,000 on hand. Which of the following is an adjusting entry on June 30?

a. debit Laundry Supplies Expense, $2,000; credit Laundry Supplies, $2,000.
b. debit Laundry Supplies, $4,500; credit Laundry Supplies Expense, $4,500.
c. debit Laundry Supplies, $2,000; credit Laundry Supplies Expense, $2,000.
d. debit Laundry Supplies Expense, $4,500; credit Laundry Supplies, $4,500.

Answer 1

d. debit Laundry Supplies Expense, $4,500; credit Laundry Supplies, $4,500

Step-by-step explanation:

Supplies are recorded as an asset so, its has a debit nature as assets does have. As there in no beginning inventory of supplies in June. The formula will be as follow.

Ending Laundry Supplies balance = Purchases during the month - Laundry Supplies Expense for the month

$1,000 = $6,500 - Laundry Supplies Expense for the month

Laundry Supplies Expense for the month = $6,500 - 1,000 = $5,500

As the option is inconsistent with the question the answer according to correct question is:

Supplies are recorded as an asset so, its has a debit nature as assets does have. As there in no beginning inventory of supplies in June. The formula will be as follow.

Ending Laundry Supplies balance = Purchases during the month - Laundry Supplies Expense for the month

$2,000 = $6,500 - Laundry Supplies Expense for the month

Laundry Supplies Expense for the month = $6,500 - 2,000 = $4,500