Question

Cal Farms reported supplies expense of $2,000,000 this year. The supplies account decreased by $200,000 during the year to an ending balance of $400,000. What was the cost of supplies the Cal Farms purchased during the year?

Answer 1

Answer:

$1,800,000

Explanation:

The closing balance reported by Cal Farms in respect of supplier account is $400,000 which is decreased by $200,000 during the year, therefore it can be assumed that the opening balance of supplies account is $600,000.

The cost of supplies purchased by the Cal Farms can be determined using the below formula:

Cost of supplies purchased=Supplies expense during the year+ closing balance- opening balance.

Cost of supplies purchased=$2,000,000+$400,000-$600,000

                                             =$1,800,000

Answer 2

Answer: $1,800,000

Explanation:

Cost of supplies = $2,000,000 + $400,000 - $600,000 = $$1,800,000