Question

The Sheridan Company purchased $7140 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $1260 on hand. The adjusting entry that should be made by the company on June 30 is:

Answer 1

Answer:

Debit  Supplies expense    $5,880

Credit  Supplies account     $5,880

Being entries to record the amount of supplies used between 2 June and 30 June.

Explanation:

The purchase of laundry supplies yet to be used is a transaction that gives rise to an asset (inventory). The purchase is  recorded as a debit to supplies and a credit to either cash or accounts payable.

When the supplies are used, the entries required to recognize the use are debit supplies expenses and credit supplies account (earlier debited at purchase)

If the  purchase on 2 June is $7140, and on 30 June amount left is $1260

Amount of supplies used = $7140 - $1260

= $5880