Cara, Inc. purchased supplies costing ₤3,500 on January 1, 2014 and recorded the transaction by increasing assets. At the end of the year ₤1,300 of the supplies are still on hand. If Cara, Inc. does not make the appropriate adjusting entry, what is the impact on its statement of financial position at December 31, 2014?

Question

Quizplus · Accepted Answer

The supplies used during the year amount to ₤2,200 (₤3,500 - ₤1,300). If no adjusting entry is made, assets will be overstated by the cost of supplies used, which is ₤2,200.

Cara, Inc Purchased Supplies Costing ₤3,500 on January 1, 2014 and and Recorded