The office supplies inventory account of Tan Traders shows a balance of $1600 on 31 December 2014. Office supplies of $550 were issued to staff in the 12 months up to 31 December 2014. After adjustment on 31 December 2014, the close of the annual accounting period:
A) office supplies expense in the income statement is $550 and office supplies inventory in the balance sheet is $1050.
B) office supplies expense in the income statement is $1600 and office supplies inventory in the balance sheet is $0.
C) office supplies expense in the income statement is $0 and office supplies inventory in the balance sheet is $1600.
D) office supplies expense in the income statement is $1050 and office supplies inventory in the balance sheet is $550.

Question

Quizplus · Accepted Answer

The correct answer is A because the office supplies expense for the year is the amount of supplies issued to staff, which is $550. The remaining inventory, which is the initial balance minus the supplies issued, is $1600 - $550 = $1050, to be reported in the balance sheet.

The Office Supplies Inventory Account of Tan Traders Shows a Balance