Question

7. Assume that a town purchases $11,000 of supplies on account toward the end of the...

7. Assume that a town purchases $11,000 of supplies on account toward the end of the year. A year-end audit reveals that $3,000 of the inventories remain unused.

Required: Prepare the journal entry for the purchase of the inventories and the year-end adjusting entry, assuming that the purchases method is used.

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Answer #1
Under Purchase method, the supplies purchased is debited to Supplies account.
And at the year end, supplies consumed shall be reconized as expense
Journal entry and adjusting entry at year-end is as under:
S.no. Accounts title and explanations Debit $ Credit $
a. Supplies account 11,000
      Cash account 11,000
(for purchase of supplies)
b. Supplies expense account 8,000
    Supplies account (11,000-3,000) 8,000
(for supplies consumed recognized)
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