ADJUSTMENT FOR SUPPLIES The downtown Chicago Nieman Marcus store purchases large quantities of supplies, including plastic garment bags and paper bags and boxes. At December 31, 2009, the following information is available concerning these supplies:

Supplies inventory, 1/1/2009 $ 4,150 Supplies inventory, 12/31/2009 5,220 Supplies purchased for cash during 2009 15,700 All purchases of supplies during the year are debited to the supplies inventory.

Required:

. What is the expense reported on the income statement associated with the use of supplies during 2009?

. What is the proper adjusting entry at December 31, 2009?

. By how much would assets and income be overstated or understated if the adjusting entry were not recorded?

Exercise