During Bruce Company's first year of operations, the company purchased $2,600 of supplies. At year-end, a physical count of the supplies on hand revealed that $975 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements?
A)Expenses will increase and assets will decrease by $1,625.
B)Assets and expenses will both increase by $975.
C)Expenses and assetswill both increase by $1,625.
D)The related adjusting entry has no effect on net income or the accounting equation.

Question

Quizplus · Accepted Answer

The adjusting entry will decrease supplies expense by the amount of supplies on hand ($2,600 - $975 = $1,625), and decrease the supplies asset by the same amount. Therefore, expenses will increase and assets will decrease by $1,625.

During Bruce Company's First Year of Operations, the Company Purchased