Office Supplies Faberton, Inc. purchases office supplies once a month and prepar

Question

Office Supplies

Faberton, Inc. purchases office supplies once a month and prepares monthly financial statements. The asset account Office Supplies on Hand has a balance of $1,330 on May 1. Purchases of supplies during May amount to $1,100. Supplies on hand at May 31 amount to $920.

Required:

1. Identify and analyze the effect of the adjustment on May 31.

How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

2. What will be the effect on net income for May if this adjustment is not recorded?
Net income for the month of May would be   by $ if this adjustment were not recognized because expenses would be .

Activity Operating Accounts Office Supplies on Hand Increase, Office Supplies Expense Increase Statement(s) Balance Sheet and Income Statement

Explanation / Answer

1 Total supplies available was = 1330 + 1100 = 2430

Since, on hand supplies were only 920, expense = 2430 - 920 = 1510

Equation:

2

If this adjustment has not been recorded, expenses are understated by 1510 thus inflating profit by 1510

Assets = Liabilities + Equity Revenues - Expenses = Net income -1510 1510 -1510

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.