Question

At the beginning of 20D, Braga Company had office supplies inventory of $800. During 20D, the company purchased office supplies amounting to $2,500 (paid for in cash and debited to office supplies inventory). At December 31, 20D, the end of the accounting year, a count of office supplies still on hand reflected $500. The adjusting entry Braga Company will record on December 31, 20D to adjust the office supplies inventory account would include a A) debit to office supplies expense for $2,800. B) debit to office supplies inventory for $2,800. C) debit to supplies expense for $2,500. D) credit to office supplies inventory for $500.

Answer 1

Answer:

A) debit to office supplies expense for $2,800

Explanation:

When Supplies is purchased, Debit supplies and credit Cash/Accounts payable. As Supplies are used up, debit supplies expense (with the amount used) and Credit Supplies account.

The movement in the balance of supplies at the start and end of a period is as a result of usage and purchases. While usage reduces the balance in supplies, purchases increases the balance. This may be expressed mathematically as  

Opening balance + purchases - units used = closing balance  

Hence,

$800 + $2500 - amount used = $500

amount used up = $800 + $2500 - $500

= $2800