Question

Question 2 Part A and B

A. Cal Farms reported supplies expense of $2,500,000 this year. The supplies account decreased by $290,000 during the year to an ending balance of $370,000. What was the cost of supplies the Cal Farms purchased during the year?

Multiple Choice

• $2,870,000.

• $2,210,000.

• $2,790,000.

• $2,130,000.

B. On September 1, 2018, Fortune Magazine sold 840 one-year subscriptions for $87 each. The total amount received was credited to deferred subscriptions revenue. What is the required adjusting entry at December 31, 2018?

Multiple Choice

• Deferred subscriptions revenue	24,360
  Subscriptions payable		24,360

• Deferred subscriptions revenue	48,720
  Subscriptions revenue		48,720

• Deferred subscriptions revenue	24,360
  Subscriptions revenue		24,360

• Deferred subscriptions revenue	73,080
  Subscriptions revenue		24,360
  Prepaid subscriptions		48,720

Answer 1

A)
Cost of Supplies Purchased          =   Supplies expense   (-) Beginning Balance (+) Ending Balance          =    $2,500,000 +( $290,000 + $370,000) (-) $370,000          =     $2,500,000 + $660,000 (-) $370,000          =     $2,790,000
Option ( C) is correct - $2,790,000
B)
Accounts Titles and Explanation	Debit (in $)	Credit (in $)
Deferred subscriptions revenue (840 x $87) x 4/12	$24,360
Subscriptions revenue		$24,360
Option ( C) is correct