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Jenson City has a June 30 fiscal year end. At the beginning of the year, the...

Jenson City has a June 30 fiscal year end. At the beginning of the year, the city had $75,000 of supplies in inventory. During the year, the city purchased $625,000 of supplies for use by activities accounted for in the General Fund. The city used $450,000 of those supplies during the year. The city had $250,000 of supplies in inventory at year end. What are the correct balances related to supplies expenditures and inventory at June 30 in the governmental fund financial statements when using the consumption method?

a) Expenditures $625,000; Supplies inventory $250,000

b) Expenditures $625,000; Supplies inventory $0

c) Expenditures $450,000; Supplies inventory $250,000

d) Expenditures $450,000; Supplies inventory $0

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Answer #1

Beginning inventory of supplies = $75,000

Supplies purchased during the year = $625,000

Ending inventory of supplies = $250,000

Supplies inventory used = Beginning inventory of supplies + Supplies purchased during the year - Ending inventory of supplies

= 75,000 + 625,000 - 250,000

= $450,000

Under the consumption method, the amount of supplies used is considered as expenditure.

Thus, the correct balances related to supplies expenditures = $450,000

Inventory at June 30 in the governmental fund financial statements when using the consumption method = $250,000

Hence, correct option is (c) i.e. Expenditures $450,000; Supplies inventory $250,000

Kindly comment if you need further assistance. Thanks

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