Q. 3-7TI - Horngren'S Financial And Managerial Accounting

Question

Iron Horse Printing Services purchased \(1,000 of printing supplies for cash, recording the transaction using the alternative treatment for deferred expenses. At the end of the year, Iron Horse had \)300 of printing supplies remaining. Record the journal entry for the purchase of printing supplies and the adjusting entry for printing supplies not used.

Step-by-Step Solution

Answer

Journal entries are as follows:

Date	Accounts and Explanation	Debit	Credit
	Supplies Expense	$1,000
	Cash		$1,000
	To record the purchase of supplies
	Printing Supplies	$300
	Supplies Expense		$300
	To record ending supplies

Explanation on Adjusting Entries

Adjusting entries are recorded at the end of the accounting period, to record the earned revenues and incurred expenses. 

Explanation on entries

To record deferred expense, purchase of office supplies will be recorded by debiting supplies expense and crediting cash by $1,000.  At the end of the period, ending balance of office supplies will be recorded by debiting printing supplies and crediting supplies expense by $300.