Wiley Consulting purchased $7,000 worth of supplies and paid cash immediately. Which of the following general journal entries will Wiley Consulting make to record this transaction? Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.
A) $$\begin{array} { | l | r | r | }
\hline \text { Supplies Expense } & 7,000 & \
\hline \text { Accounts Payable } & & 7,000 \
\hline
\end{array}$$
B) $$\begin{array} { | l | r | r | }
\hline \text { Supplies } & 7,000 & \
\hline \text { Cash } & & 7,000 \
\hline
\end{array}$$
C) $$\begin{array} { | l | r | r | }
\hline \text { Supplies } & 7,000 & \
\hline \text { Accounts Payable } & & 7,000 \
\hline
\end{array}$$
D) $$\begin{array} { | l | r | r | }
\hline \text { Accounts Payable } & 7,000 & \
\hline \text { Supplies } & & 7,000 \
\hline
\end{array}$$
E) $$\begin{array} { | l | r | r | }
\hline \text { Cash } & 7,000 & \
\hline \text { Supplies } & & 7,000 \
\hline
\end{array}$$

Question

Wiley Consulting purchased $7,000 worth of supplies and paid cash immediately. Which of the following general journal entries will Wiley Consulting make to record this transaction? Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.
A) $$\begin{array} { | l | r | r | } 
\hline \text { Supplies Expense } & 7,000 & \
\hline \text { Accounts Payable } & & 7,000 \
\hline
\end{array}$$
B) $$\begin{array} { | l | r | r | } 
\hline \text { Supplies } & 7,000 & \
\hline \text { Cash } & & 7,000 \
\hline
\end{array}$$
C) $$\begin{array} { | l | r | r | } 
\hline \text { Supplies } & 7,000 & \
\hline \text { Accounts Payable } & & 7,000 \
\hline
\end{array}$$
D) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts Payable } & 7,000 & \
\hline \text { Supplies } & & 7,000 \
\hline
\end{array}$$
E) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,000 & \
\hline \text { Supplies } & & 7,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The journal entry to record the purchase of supplies and payment in cash is to debit Supplies for $7,000 and credit Cash for $7,000. Since Wiley Consulting treats prepaid and unearned items as balance sheet accounts, there is no need to create separate accounts for supplies. Option A is incorrect because it records the transaction as a prepayment when it is a purchase and immediate payment. Option C is incorrect because it records the transaction as an expense when it is an asset purchase. Option D is incorrect because it over-complicates the entry by recording the transaction twice, once as an asset purchase and once as a cash payment. Option E is incorrect because it records the transaction as a sale when it is a purchase.