During the first year of Wilkinson Co.'s operations, all purchases were recorded as assets. Supplies in the amount of $25,800 were purchased. Actual year-end supplies amounted to $5,600. The adjusting entry for store supplies will
A) increase net income by $20,200.
B) increase expenses by $20,200.
C) decrease supplies by $5,600.
D) debit Accounts Payable for $5,600.

Question

Quizplus · Accepted Answer

The adjusting entry for store supplies will decrease the asset account for supplies by the difference between the purchase and the actual year-end supplies, which is $20,200 ($25,800 - $5,600). Since expenses increase with a debit entry, the adjusting entry will be a debit to Supplies Expense and a credit to Supplies for $20,200, increasing expenses by that amount. Therefore, the correct answer is B.

During the First Year of Wilkinson Co