Question

A company is in its first month of operations. Supplies worth $4,000 were purchased on January 5. At the end of the month supplies worth $3,000 were in hand. What adjusting entry would be made at the end of January?

Answer 1

Answer:

Adjustying Entry at the end of January

                                                 Dr.        Cr.

Supplies Expense Account  $1,000

Supplies Inventory Account             $1,000

Explanation:

Opening supplies  = 0 (First month of operation)

Purchases on January 5 = $4,000

Supplies on January 31 = $3,000

Closing Inventory = Opening Inventory + Purchase during the month - Expense for the month

$3,000 = $0 + $4,000 - Expense for January

Expense for January = $4,000 - $3,000 = $1,000