The downtown location of Chicago Clothiers purchases large quantities of supplies, including plastic garment bags and paper bags and boxes. At December 31, 2011, the following information is available concerning these supplies:
Supplies inventory, 1/1/2011 ............. $ 4,150
Supplies inventory, 12/31/2011 ............ 5,220
Supplies purchased for cash during 2011 ....... 12,690
All purchases of supplies during the year are debited to the supplies inventory.
Required:
1. What is the expense reported on the income statement associated with the use of supplies during 2011?
2. What is the proper adjusting entry at December 31, 2011?
3. By how much would assets and income be overstated or understated if the adjusting entry were not recorded?