Knoll Company started Year 2 with a $1,000 balance in its Cash account, a $200 balance in its Supplies account and a $1,200 balance in its common stock account. During Year 2, the company experienced the following events:(1)Paid $600 cash to purchase supplies.(2)Physical count revealed $50 of supplies on hand at the end of Year 2.Based on this information the amount of supplies expense reported on the Year 2 income statement is
A)$600
B)$750
C)$800
D)$850

Question

Quizplus · Accepted Answer

The company spent $600 to purchase supplies during the year, which is the amount that would be reported as supplies expense if there were no supplies remaining at the end of the year. However, the physical count revealed that there were $50 of supplies on hand at the end of the year. This means that only $550 of the supplies purchased during the year were used up or consumed, and therefore should be reported as supplies expense on the income statement. Adding the $50 of supplies on hand to the $550 of supplies expense gives a total of $600 for supplies, which is the correct answer.

Knoll Company Started Year 2 with a $1,000 Balance in Its