3. The Supplies Inventory account had a $4,500 balance at the beginning of the y

Question

3. The Supplies Inventory account had a $4,500 balance at the beginning of the year (January 1, 2015). During the year, $6,000 of supplies were acquired, with the Supplies Expense account debited at the time of purchase. The supplies count at the end of the year (December 31, 2015) showed $5,000 of supplies is still on hand.

For each of the above numbered items, prepare the necessary adjusting journal entry. If no adjusting entry is required, explain why. Put the adjusting journal entries in the worksheet titled “Part A Answers to Part A.”

I know the answer is $500, but I wonder why the answer is $500.

Explanation / Answer

Supplies Inventory    Opening                :    $ 4,500

Add: Supplies Acquired during the year :    $ 6,000

Total Supplies available                              :    $10,500

Less: Supplies on hand                              :    $ 5,000

Supplies used during the year (10,500 - 5,000)    = $ 5,500/-

Entry used at the time of purchase :

                                    Supplies Expense           Dr             6,000

                                              To Accounts Payable                              6,000

The total supplies expense during the period is only $ 5,500/-. So pass the following adjusting entry:

                                          Supplies in Hand                 500

                                                      To Supplies Expense                             500

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