At the beginning of 20B,Down Company had office supplies inventory of $400.During 20B,the company purchased office supplies amounting to $2,500 (paid for in cash and debited to office supplies inventory).At December 31,20B (end of the accounting year),a count of office supplies on hand reflected $300.Therefore,the adjusting entry should include which of the following?

Question

Quizplus · Accepted Answer

The adjusting entry should reflect the actual amount of office supplies expenses used during the year. Based on the information given, the total amount of office supplies purchased and debited to the inventory was $2,500, and the ending inventory count was $300. Therefore, the amount of supplies expense used during the year was:

$2,500 (purchases) - $300 (ending inventory) = $2,200

Thus, the adjusting entry should include a debit to supplies expense for $2,200. However, since the entire $2,500 was initially debited to the inventory account, there should also be a credit to the office supplies inventory for the amount of unused supplies still on hand, which is:

$2,500 (purchases) - $300 (ending inventory) = $2,200

The total amount of the credit to office supplies inventory is $2,200. Therefore, the adjusting entry should include:

Debit to Supplies Expense: $2,200
Credit to Office Supplies Inventory: $2,200

The answer choice that reflects this is D, debit to supplies expense of $2,600 (which includes the initial inventory balance of $400 and the additional $2,200 of supplies used during the year) and a credit to office supplies inventory of $2,500. However, this answer choice is not correct since it does not reflect the correct amount of supplies used during the year.

At the Beginning of 20B,Down Company Had Office Supplies Inventory