Prepaid (deferred) expenses adjustments LO P1 For each separate case below, follow the three-step process for adjusting the supplies asset account at December 31. nts Step 1: Determine what the current account balance equals
Step 2: Determine what the current account balance should equal.
Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.
Skipped Assume no other adjusting entries are made during the year eBook
a. The Supplies account has a $360 debit balance to start the year. No supplies were purchased during the current year. A December 31 physical count shows $140 of supplies remaining.
Hint Supplies
Step 1: Determine what the current account balance equals.
Print Step 2: Determine what the current account balance should equal.
eferences Step 3: Record the December 31, adjusting entry to get from step 1 to step 2
b. The Supplies account has an $950 debit balance to start the year. Supplies of $2,400 were purchased during the current year and debited to the Supplies account. A December 31 physical count shows $725 of supplies remaining. Supplies
Step 1: Determine what the current account balance equals
Step 2: Determine what the current account balance should equal.
Step 3 Record the December 31, adjusting entry to get from step 1 to step 2

a. In the adjusting entries, Supplies expenses is $220.

b. In the adjusting entries, Supplies expenses is $2,625.

Explanation:

a. The Supplies account has a $360 debit balance to start the year. No supplies were purchased during the current year. A December 31 physical count shows $140 of supplies remaining.

Note: See the attached excel file for Steps 1, 2 and 3.

In the attached excel file, the Supplies expense in the adjusting entries is calculated as follows:

Supplies expense = What the current account balance – What the current account balance should be = $360 - $120 = $220

b. The Supplies account has an $950 debit balance to start the year. Supplies of $2,400 were purchased during the current year and debited to the Supplies account. A December 31 physical count shows $725 of supplies remaining.

Note: See the attached excel file for Steps 1, 2 and 3.

In the attached excel file, the Supplies expense in the adjusting entries is calculated as follows:

Supplies expense = What the current account balance + Supplies purchased during the current year – What the current account balance should be = $950 + $2,400 - $725 = $2,625

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