Henna Hair Salon purchased supplies for $6,000 and debited Supplies for the full amount. At the end of the accounting period, $1,800 worth of supplies were still on hand. Identify the adjusting entry needed at the end of the period.

Cost of goods sold = $6,000 - $1,800 = $4,200

Closing Inventories = $1,800

Explanation:

$

Purchase supplies 6,000

Closing inventories (1,800)

Cost of goods sold 4,200

Hence, cost of sales will be $4,200 under income statement while closing inventory of $1,800 will be recorded under current assets in the Balance sheet.

Debit Supplies expense $4,200

Credit Supplies (B/s) $4,200

Explanation:

When the purchase was done, the entries posted would have been;

Debit Supplies (B/s) $6,000

Credit Cash account $6,000

Being entries to recognize purchase of supplies.

At the end of the accounting period, $1,800 worth of supplies were still on hand then, cost of supplies utilized

= $6,000 - $1,800

= $4,200

The adjusting entry needed at the end of the period would be

Debit Supplies expense $4,200

Credit Supplies (B/s) $4,200

Being entries to recognize the supplies used up.