During a company's first year of operations, the asset account, Office Supplies, was debited for $3800 for the purchases of supplies. At year-end, a physical count of the supplies on hand revealed that $1575 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements?
A. The related adjusting entry has no effect on net income or the accounting equation.
B. Assets and expenses will both increase by $1575.
C. Expenses will increase and assets will decrease by $2225.
D. Expenses and assets will both increase by $2225.
Answer: D
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