White Laundry Company purchased $6,500 of supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the supplies indicated only $3,000 on hand. It is the company’s first period of operations. The adjusting entry that should be made by the company on June 30 is:.
1. debit supplies expense, $3,000; credit supplies, $3,000.
2. debit supplies, $3,000; credit supplies expense, $3,000.
3. debit supplies, $3,500; credit supplies expense, $3,500.
4. debit supplies expense, $3,500; credit supplies, $3,500.

4. debit supplies expense, $3,500; credit supplies, $3,500.

Explanation:

Assuming there is no opening inventory of supplies. So the purchases mad is the only inventory which is in stock during the Month of June. Stock has been used during the month and at the end of the month it remains only $3,000.

Using following Formula we will calculate the supplies Expense.

Ending Inventory of supplies = Opening Inventory of supplies + Purchases - supplies Expensed in the period

$3,000 = $0+ $6,500 - Supplies Expensed in the period

$3,000 = $6,500 - Supplies Expensed in the period

$6,500 - $3,000 = Supplies Expensed in the period

Supplies Expensed in the period = $3,500

So, the entry will be

Debit supplies expense   $3,500

Credit supplies                 $3,500

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