During a company's first year of operations, the asset account, Office Supplies, was debited for $2,300 for the purchases of supplies. At year-end, a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements?
A. Expenses and assets will both increase by $1,475.
B. Assets and expenses will both increase by $825.
C. Expenses will increase and assets will decrease by $1,475.
D. The related adjusting entry has no effect on net income or the accounting equation.
Answer: C
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