Bay City Uses the Purchases Method to Account for Supplies

question 54

Multiple Choice

Bay City uses the purchases method to account for supplies. At the beginning of the year the city had no supplies on hand. During the year the city purchased $600,000 of supplies for use by activities accounted for in the general fund. The city used $400,000 of those supplies during the year. Assuming that the city maintains its books and records in a manner that facilitates the preparation of its fund financial statements, at fiscal year-end the appropriate account balances related to supplies expenditures and supplies inventory would be

• A) Expenditures $600,000; Supplies inventory $200,000.
• B) Expenditures $600,000; Supplies inventory $0.
• C) Expenditures $400,000; Supplies inventory $200,000.
• D) Expenditures $400,000; Supplies inventory $0.