The Year-End Adjustment to Recognize One Month's Work on the Three-Month

Multiple Choice

The year-end adjustment to recognize one month's work on the three-month contract results in a $2,000 decrease in liabilities (unearned revenue) and an increase in equity (retained earnings due to recognizing revenue) .
The following account balances were drawn from the 2016 financial statements of Grayson Company:

-Sheldon Company began 2016 with $1,200 in its supplies account.During the year,the company purchased $3,400 of supplies on account.The company paid $3,000 on accounts payable by year end.On December 31,2016,Sheldon counted $1,400 of supplies on hand.Sheldon's financial statements for 2016 would show:

A) $1,600 of supplies;$200 of supplies expense
B) $1,400 of supplies;$2,000 of supplies expense
C) $1,400 of supplies;$3,200 of supplies expense
D) $1,600 of supplies;$3,400 of supplies expense