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During a company's first year, the asset account, Office Supplies, was debited for $2,300 for the purchases of supplies. At year-end, office supplies on hand were counted and determined to be $825. The proper adjusting entry crediting supplies and debiting supplies expense will A. increase expenses and decrease assets by $1,475. B. decrease assets and increase expenses by $825. C. increase expenses and increase assets by $1,475. D. have no effect on net income or the accounting equation

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Answer:

A. increase expenses and decrease assets by $1,475.

Explanation:

Beginning office supplies (Asset)           $2,300

Ending office supplies (Asset)                    $825

Office supplies used (Asset decrease) = $1,475

Therefore, the journal entry is as follows:

Supplies expense (Debit) = $1,475

Office supplies  (Credit)    = $1,475

In that case, an expense increases (supplies expense) due to the decrease of an asset (Office supplies). All the other options are wrong apart from option A.

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