Sheldon Company began Year 1 with $1,200 in its supplies account. During the year, the company purchased $3,400 of supplies on account. The company paid $3,000 on accounts payable by year end. At the end of Year 1, Sheldon counted $1,400 of supplies on hand. Sheldon's financial statements for Year 1 would show:

Question

Quizplus · Accepted Answer

The supplies account balance at the end of Year 1 can be calculated as follows: 
Beginning balance + purchases - payments = Ending balance 
$1,200 + $3,400 - $3,000 = $1,600 
However, since Sheldon only had $1,400 of supplies on hand at the end of the year, the supplies expense for the year would be the difference between the supplies used and the ending supplies balance: 
Supplies used = Beginning balance + Purchases - Ending balance 
Supplies used = $1,200 + $3,400 - $1,400 = $3,200 
Therefore, the financial statements for Year 1 would show $1,400 of supplies and $3,200 of supplies expense.

Sheldon Company Began Year 1 with $1,200 in Its Supplies