On December 31,2015 Winters Company received a $385 bill for the purchase of supplies in December that it will not pay for until January 15.The adjusting entry needed on December 31 to accrue this cost is:
A)Debit Supplies $385;credit Accounts Payable $385.
B)Debit Accounts Payable $385;credit Supplies $385.
C)Debit Accounts Payable $385;credit Cash $385.
D)Debit Supplies Expense $385;credit Cash $385.
E)Debit Supplies Expense $385;credit Supplies $385.

Question

Quizplus · Accepted Answer

The adjusting entry needed on December 31 to accrue the cost of supplies that will not be paid for until January 15 is to debit Supplies (an expense account) for $385 and credit Accounts Payable for $385. This will record the expense in the current year and create a liability for the amount owed. Option B is incorrect because it would decrease supplies and increase the liability, while the actual cost has not been paid yet. Option C is incorrect because cash has not been paid out or received. Option D is incorrect because it would decrease cash, while no cash has been paid. Option E is incorrect because it would increase supplies (an asset account), which is not accurate since the supplies have already been consumed as an expense.

On December 31,2015 Winters Company Received a $385 Bill for the Purchase