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On 1 June a business buys $1,000 of supplies and records the full amount as an asset. By 30 June, $100 of supplies has been used. What is the correct month-end adjusting entry?
ADebit Supplies $900; credit Cash $900
BDebit Supplies $100; credit Supplies Expense $100
CDebit Supplies Expense $900; credit Supplies $900
DDebit Supplies Expense $100; credit Supplies $100
Answer & Solution
Correct answer: D. Debit Supplies Expense $100; credit Supplies $100
1. The amount used up during the month is the adjusting amount: $\$100$.
2. The expense increases (debit Supplies Expense $\$100$) and the asset decreases (credit Supplies $\$100$).
3. Hence D is correct.
4. B reverses the entry; C uses the remaining $\$900$ on hand rather than the amount used; A wrongly involves cash.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.3.1 "Supplies—Deferred Expense", p.60_
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