A company purchased office supplies costing $5000 and increased Supplies for the full amount.At the end of the accounting period a physical count of office supplies revealed $900 still on hand.The appropriate adjustment to be made at the end of the period would be:

Question

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The original cost of supplies was $5000, and $900 worth of supplies still remain; therefore, $4100 worth of supplies have been used. This means that Supplies Expense needs to be increased by $4100 and Supplies needs to be decreased by $4100. Therefore, the appropriate adjustment is to increase Supplies Expense $4100 and Supplies $4100. Choice A is incorrect because it overstates the expense by including the original cost of supplies even though some remain on hand. Choice B is incorrect because it only reflects the amount on hand and does not account for the supplies that have been used. Choice D is incorrect because it reverses the accounts, putting the increase in Supplies as an expense, and vice versa.

A Company Purchased Office Supplies Costing $5000 and Increased Supplies