The Town of Pasco has no supplies inventory in its general fund on January 1,2008.During 2008,Pasco incurred expenditures of $200,000 for the acquisition of supplies.On December 31,2008,Pasco's inventory of supplies amounted to $30,000.Assume Pasco uses the purchase method of accounting for supplies in its general fund and that the village reports on the calendar year.On December 31,2008,the general fund of Pasco should credit:

Question

Quizplus · Accepted Answer

Under the purchase method, the entire amount of supplies purchased is initially recorded as an expenditure. At year-end, the inventory of supplies is recognized by adjusting the fund balance. Therefore, the Fund Balance-Reserved for Inventories should be credited for the $30,000 of supplies on hand.

The Town of Pasco Has No Supplies Inventory in Its