On December 31, Winters Company received a $385 bill for the purchase of supplies in December that it will not pay for until January 15. Winters follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry needed on December 31 to accrue this cost is:
A) Debit Supplies $385; credit Accounts Payable $385.
B) Debit Supplies Expense $385; credit Supplies $385.
C) Debit Accounts Payable $385; credit Supplies $385.
D) Debit Accounts Payable $385; credit Cash $385.
E) Debit Supplies Expense $385; credit Cash $385.

Question

Quizplus · Accepted Answer

The adjusting entry should recognize the liability and expense incurred in December. Therefore, debit Supplies Expense to recognize the expense and credit Accounts Payable to recognize the liability.

On December 31, Winters Company Received a $385 Bill for the Purchase