Question

Martel Co. had supplies of $24,000 and $33,000 at the end of 2017 and 2018, respectively. During 2018, Howard paid $128,000 for supplies. Supplies expense in the 2018 income statement was____________.
a. $119,000.
b. $128,000.
c. $137,000.
d. $110,000.

Answer 1

Answer:

a. $119,000.

Explanation:

The movement in the supplies account is as a result of purchases and use. When purchases are made, debit supplies account and credit cash or accounts payable. When supplies are used, debit supplies expense and credit supplies account. The movements in the supplies account may be explained by the equation below;

Opening balance + purchases - cost of goods sold/used/supplies expense = closing balance

$24000 + $128000 - supplies expense = $33000

Supplies expense = $24000 + $128000 - $33000

= $119,000

This amount will be reported in the income statement as an expense.