31E_3 - Horngren'S Financial And Managerial Accounting

Question

Question :At the beginning of the year, office supplies of \(1,200 were on hand. During the year, Tempo Air Conditioning Service paid \)4,000 for more office supplies. At the end of the year, Tempo has $800 of office supplies on hand. Requirements 1. Record the adjusting entry assuming that Tempo records the purchase of office supplies by initially debiting an asset account. Post the adjusting entry to the Office Supplies and Supplies Expense T-accounts. Make sure to include the beginning balance and purchase of office supplies in the Office Supplies T-account. 2. Record the adjusting entry assuming that Tempo records the purchase of office supplies by initially debiting an expense account. Post the adjusting entry to the Office Supplies and Supplies Expense T-accounts. Make sure to include the beginning balance in the Office Supplies T-account and the purchase of office supplies in the Supplies Expense T-account. 3. Compare the ending balances of the T-accounts under both approaches. Are they the same?

Step-by-Step Solution

Answer

Under both the method balances are same. 

Step-by-Step-Solution Step1: Explanation on Adjusting Entries

Adjustingn entries are recorded to record accrued revenues and expenses for the period. Also it is recorded to make adjustments in the accounts, in case wrong account is debited or credited.

Step 2: Explanation on Both Method

In method 1, ending balance of office supplies equals $800 and supplies expense balance equals $4,400, which is same as compared to method 2.