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At the beginning of 2016, Stillwater Company had a $250 balance in its Supplies account. During the year the company paid $1,500 cash for additional supplies. The physical count of supplies on hand at the end of 2016 was $1,400. Which of the following statements related to Stillwater Company's 2016 transactions is incorrect?
a. The account Supplies represents a liability on the balance sheet.
b. The statement of cash flows for operating activities decreased by $1,500.
c. Net income decreased by $350.
d. All of the statements are correct.

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Answer:

a. The account Supplies represents a liability on the balance sheet.

Explanation:

Operating activities are the activities that organization carry out to ensure the smoothness of such company day to day activities. Examples of operating activities are cash receipts from sales of goods, cash payments to suppliers, employees, and expenses.

Stillwater Company Operating cost is decrease by 1,500 as the cash paid to the supplier in addition is an outflow

Also,

Balance of supplies     250

Supplies at hand         1400

                                    1,650

Cash paid for supply (1,400)

in addition                  

Net Income                   250

Conclusion: The option A cannot is incorrect as supplies account is recognized under the Current Asset as an asset not a liability.

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