Cornerstone Exercise 3-21 Adjustment for Supplies

Pain-Free Dental Group Inc. purchased dental supplies of $18,200 during the year. At the end of the year, a physical count of supplies showed $4,125 of supplies on hand.

Required:

1. Prepare the adjusting entry needed at the end of the year.
2. What is the amount of supplies reported on Pain-Free’s sheet at the end of the year?

Concept Introduction:

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.

The business activity for each type of adjusting entry is explained as follows:

• Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
• Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
• Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
• Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
• Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period.
Requirement-1:

To Prepare:

The Adjusting entries as on Dec. 31.

The Adjusting entries as on Dec. 31 are explained as follows:

Pain Free Dental Group Inc.
Adjusting entries
#	Date	Account titles	Debit	Credit

Concept Introduction:

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.

The business activity for each type of adjusting entry is explained as follows:

• Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
• Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
• Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
• Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
• Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period.

The amount of supplies to be reported on the balance sheet on Dec. 31.