Muldoon Advertising has an opening balance in its supplies account of $2400 and purchases $3000 of supplies during the year.A year-end physical count shows $2800 in supplies inventory.Which is the appropriate adjustment at year end?

Question

Quizplus · Accepted Answer

The adjustment needed is to account for the supplies used during the year. The opening balance plus purchases equals $5400 ($2400 + $3000). The ending inventory is $2800, so the supplies used (and thus the expense) is $2600 ($5400 - $2800). Therefore, Supplies Expense should be increased by $2600, and Supplies should be decreased by $2600.

Muldoon Advertising Has an Opening Balance in Its Supplies Account