Question

Week 1 Assignment

Question 1

Ruddy Lewis operates a bike repair shop operating under the name R.L. Bike Repairs. The balances of his accounts on April 1 of the current year were as follows:

The following transactions were incurred for the month of April:

9. Inventory of supplies at end of the month (April 30) was $550

	Assets        = Liabilities + Owners Equity
	Balance April 1	+	Cash					Ruddy Lewis, Capital
								$12,400
	Transaction Numbers
	9				-650			-650
	Balance
	10
	Balance, April 30		$13,970		$550	$9,500	$3,900	$20,120

Theres an acctg problem( Ruddy Lewis..... ) my question is under the supplies column, you listed 650 under entry #9, entry for #9 should be 550.if we use 550 then problem doesnt balance.

pleas help

Answer 1

• Actually, you are mis interpreting the problem.
• The question says that Supplies account balance at the end [on April 30] is [or should have to be] $ 550.
• To make the balance go to $ 550, an adjustment was $ 650 is required, because the unadjusted balance in Supplies (before adjustment of 650) would have been $ 1200 DEBIT.
• In the adjusting entry,
  Supplies Expenses will be debited by $ 650, and hence Net Income will decrease, thereby decreasing Ruddy Lewis Capital. This is why $ 650 is deducted from ‘Capital’ column.

Supplies account will be credited by the same amount of $ 650, and hence $ 650 has been deducted so that the ending balance will become equal to $ 550 which is the actual physical balance of supplies.

• Please focus-
  $ 650 is the amount that is to be adjusted, while
  $ 550 is the amount because of which the adjustment of $ 650 is required.
• You deduct $ 650 from under Supplies column and deduct $ 650 from Lewis Capital, and the accounting equation will match.
• $ 13970 + $ 550 + $ 9500 = $ 3900 + $ 20120