Question

4-a-15] Adjusting Entry. A physical count of consumable supplies at year-end showed an ending balance of $64,420, a decrease of $1,580 during the year. The city uses the purchases method of accounting for its inventory in the General Fund and the consumption method at the government-wide level. Since the city uses a periodic inventory system, both at the fund and governmental levels, it records all purchases of inventory as expenditures in the General Fund and as expenses at the government-wide level. The decrease in inventory requires no adjustment to the expenditure account (since the expenditure was recorded in a prior period); however, an adjustment to the expenses accounts should be made to the General Government function. Required: Prepare the adjusting journal entries in the General Fund journal to adjust the Inventory of Supplies and Fund Balance—Nonspendable—Inventory of Supplies accounts to the correct balances and the governmental activities journal to adjust the Expenses—General Government and Inventory of Supplies accounts.

Answer 1

Step-by-step explanation:

The journal entries are shown below:

For General Fund:

Inventories of Supplies A/c Dr $1,580

To General Fund balance - Non-spendable inventory of Supplies accounts $1,580

(Being the expenditure for the purchase of inventory is recorded)

For the Government-Wide level:

Inventories of Supplies A/c Dr $1,580

To Expenses—General Government $1,580

(Being the expenses for the purchase of inventory is recorded)