The Supplies account had an adjusted balance of $2,000 on December 31,2013.During 2014,the company purchased $5,000 of supplies.A physical count of supplies at December 31,2014,shows $3,000 of supplies available.(Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as liabilities.) How would the company record the related adjusting entry at December 31,2014?
A)Debit Supplies Expense for $4,000 and credit Supplies for $4,000.
B)Debit Supplies Expense for $3,000 and credit Supplies for $3,000.
C)Debit Supplies for $3,000 and credit Supplies Expense for $3,000.
D)Debit Supplies for $7,000 and credit Cash for $7,000.
E)Debit Supplies for $3,000 and credit Cash for $3,000.

Question

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The company started with $2,000 in supplies, purchased $5,000 more, totaling $7,000. The physical count shows $3,000 remaining, so $4,000 was used. The adjusting entry is to debit Supplies Expense for $4,000 and credit Supplies for $4,000 to account for the used supplies.

The Supplies Account Had an Adjusted Balance of $2,000 on December