Question

A company started the year with $3,750 of supplies on hand. During the year the company purchased additional supplies of $2,000 and recorded them as an increase to the supplies asset. At the end of the year the company determined that only $750 of supplies are still on hand. What is the adjusting journal entry to be made at the end of the period?


A. Debit Supplies Expense and credit Supplies for $5,000
B. Debit Supplies and credit Supplies Expense for $750
C. Debit Supplies Expense and credit Supplies for $3,000
D. Debit Supplies and credit Supplies Expense for $2,500

Answer 1

Answer:

A. Debit Supplies Expense and credit Supplies for $5,000

Explanation:

The adjusting journal entry is shown below:

Supplies expense A/c Dr $5,000

          To Supplies A/c $5,000

(Being supplies account is adjusted)

The supplies expense is computed below

= Opening Supplies balance + purchase value of an additional supplies - supplies still on hand  at the end of the year

= $3,750 + $2,000 - $750

= $5,000