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During the first year of Vaughn Manufacturing's operations, all purchases were recorded as assets. Supplies in...

During the first year of Vaughn Manufacturing's operations, all purchases were recorded as assets. Supplies in the amount of $27900 were purchased. Actual year-end supplies amounted to $6400. The adjusting entry for store supplies will increase expenses by $21500. decrease supplies by $6400. debit Accounts Payable for $6400. increase net income by $21500.

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Answer #1
Correct Option A i.e. supplies will increase expenses by $21500
Working Note :
Calculation of supplies Expense
Supples Purchased                                            27,900
Less: Year end supplies balance                                            (6,400)
Supplies Expense                                            21,500
Adjusting Entry would be:
Accounts Name Debit Credit
Supplies Expense          21,500 (Increase)
      Supplies          21,500 (Decrease)
(To record supplies expense)
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