The Kookie Kutter Bakery purchased $6,500 worth of baking supplies on June 2 and recorded the purchase as an expense. On June 30, an inventory of the baking supplies indicated $3,000 of supplies is still on hand. The adjusting entry that should be made by the company on June 30 is
A) debit Baking Supplies Expense, $3,000; credit Baking Supplies, $3,000.
B) debit Baking Supplies Expense, $3,500; credit Baking Supplies, $3,000.
C) debit Baking Supplies, $3,000; credit Baking Supplies Expense, $3,000.
D) debit Baking Supplies Expense, $3,500; credit Baking Supplies, $3,500.

Question

Quizplus · Accepted Answer

The company initially recorded the entire $6,500 as an expense. However, since $3,000 of supplies are still on hand, they need to adjust this by reducing the expense and recognizing the remaining supplies as an asset. Thus, they debit Baking Supplies for $3,000 and credit Baking Supplies Expense for $3,000.

The Kookie Kutter Bakery Purchased $6,500 Worth of Baking Supplies