Bay City uses the purchases method to account for supplies. At the beginning of the year the city had no supplies on hand. During the year the city purchased $600,000 of supplies for use by activities accounted for in the general fund. The city used $400,000 of those supplies during the year. Assuming that the city maintains its books and records in a manner that facilitates the preparation of its fund financial statements, at fiscal year-end the appropriate account balances related to supplies expenditures and supplies inventory would be
A) Expenditures $600,000; Supplies inventory $200,000.
B) Expenditures $600,000; Supplies inventory $0.
C) Expenditures $400,000; Supplies inventory $200,000.
D) Expenditures $400,000; Supplies inventory $0.

Question

Quizplus · Accepted Answer

Under the purchases method, the entire amount of supplies purchased is recorded as an expenditure when acquired. Therefore, expenditures would be $600,000. The supplies inventory would be the remaining supplies not used, which is $200,000.

Bay City Uses the Purchases Method to Account for Supplies