On December 31,Jacoby Company received a $385 bill for the purchase of supplies in December that it will not pay for until January 15.Jacoby follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment.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

Since the supplies were purchased in December but the payment will not be made until January, an adjusting entry is required at the end of December to accrue this cost. The entry should debit Supplies and credit Accounts Payable. This will increase the Supplies asset account and create a liability in the Accounts Payable account for the amount owed to the supplier. Thus, the correct option is A) Debit Supplies $385; credit Accounts Payable $385.

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