During Bruce Company's first year of operations, the company purchased $2,300 of supplies. At year-end, a physical count of the supplies on hand revealed that $825 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 $1,475.
B)Assets and expenses will both increase by $825.
C)Expenses and assets will both increase by $1,475.
D)The related adjusting entry has no effect on net income or the accounting equation.

Question

Quizplus · Accepted Answer

The adjusting entry will decrease the supplies account (an asset) by $1,475 ($2,300 - $825) and increase the supplies expense account by the same amount. Therefore, expenses will increase and assets will decrease by $1,475. This entry will affect the income statement by increasing expenses and reducing net income, and the balance sheet by decreasing assets.

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