Question

I don’t understand why it says "these supplies would have cost $1,875 if purchased under normal circumstances".

Do these $1,875 go anywhere on the balance sheet? Why is that included in the question?

Until now i’m guessing just need to add $18,000 to accounts payable and subtract $1,000 from cash. Is that all?

Thank you in advance,

Best,

Riccardo

Oct. 6 More furniture was purchased on account at a cost of $18,000, to be paid within 30 days. Supplies were purchased for $1,000 cash from a restaurant supply center that was going out of business. These supplies would have cost $ 1.875 if purchased under normal circumstances.

Answer 1

It is given just for reference and comes handy only when you are asked to compute the fair value of all the assets or to draw financial statements based on fair value of assets.

As far as normal preparation of balance sheet or preparation of statement of Cash flow or preparation of schedule of accounts payable is concerned you have to just ignore that sentence and take $1000 for all your reference that's it.