Refer to BE3-3. Assume that instead of debiting an asset account for the purchases of supplies, Hahn

Consulting Company debits an expense account. Recall that

(1) On January 1, 2014, the company had supplies of $825 on hand;

(2) The company purchased $3,165 of supplies on May 31, 2014; and that

(3) On December 31, 2014, a count showed there was $1,015 of supplies on hand.

(a) Using T accounts enter the January 1, 2014, balance in the Supplies and Supplies Expense accounts.

(b) Prepare the journal entry to record the purchase of supplies on May 31, 2014. Post the part of the journal entry that affects only the Supplies or Supplies Expense accounts.

(c) Determine what amounts should appear on the 2014 financial statements for Supplies and Supplies Expense.

(d) Prepare and post the adjusting entry required at December 31, 2014.

(e) Compare part (c) above with part (c) in BE3-3. Does it matter whether an original entry is recorded to an asset account or an expense account? Explain.

Data from BE3-3

Hahn Consulting Company’s general ledger showed $825 in the Supplies account on January 1, 2014. On May 31, 2014, the company paid $3,165 for additional supplies. A count on December 31, 2014, showed $1,015 of supplies on hand.