Dreamtime Laundry purchased $7,000 worth of supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the supplies indicated only $1,000 on hand. The adjusting entry that should be made by the company on June 30 is

Question

Quizplus · Accepted Answer

Since the supplies purchased ($7,000) were recorded as an asset, but only $1,000 worth of supplies were on hand at the end of the month, this means that $6,000 worth of supplies were used/consumed during the month (i.e. Supplies Expense). Thus, the adjusting entry should be to debit Supplies Expense for $6,000 and credit Supplies for $6,000 to correctly reflect the decrease in the asset value. So, option D is the correct answer.

Dreamtime Laundry Purchased $7,000 Worth of Supplies on June 2