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3 September, 09:15

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

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  1. 3 September, 10:45
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    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
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