On June 1,Stackable,Inc.has a balance of $6,000 in Supplies.During June,the company buys another $2,000 of supplies.On June 30,the company counts the supplies and finds that $800 are left unused.What is the proper adjustment at June 30?
A)Decrease Supplies and shareholders' equity by $7,200.
B)Decrease Supplies and shareholders' equity by $8,000.
C)Decrease Cash and increase Supplies by $2,000.
D)Decrease Cash and increase Accounts payable by $7,200.

Question

Quizplus · Accepted Answer

The proper adjustment is to decrease Supplies by the amount used, which is $7,200 ($6,000 + $2,000 - $800), and decrease shareholders' equity by the same amount to reflect the expense.