Answer:
The financial statements will show
Accounts payable $200 and Supplies $1,400 both in the balance sheet.
Supplies expense $3,200 in the income statement
Explanation:
When Supplies are purchased, a debit is posted to Supplies account and a credit to cash account or accounts payable with the cost of the purchase.
As the inventories are used, debit Supplies expense and credit Supplies inventory account. The supplies account balance is shown in the balance sheet and the amount used up as an expense in the income statement.
The movement in the supplies account is given as
Opening balance + purchases - Supplies used = Closing balance
$1,200 + $3,400 - Supplies used = $1,400
Supplies used = $1,200 + $3,400 - $1,400
= $3,200
The amount paid is deducted from the amount payable by debiting accounts payable and crediting cash. Hence balance in the payables account
= $3,400 - $3,200
= $200
