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8_murik_8 [283]
4 years ago
11

A gift shop ended the year with a balance of $20,000 in the Merchandise Inventory account. A physical count of the inventory rev

ealed that only $19,500 of inventory existed at year end. What journal entry is needed to adjust the Merchandise Inventory account?
Business
2 answers:
MrRa [10]4 years ago
7 0

Answer:

Debit Cost of Goods Sold and credit Merchandise Inventory for $500.

Explanation:

When there is comparism between merchandise inventory and physical count, the difference noticed is accounted to shrinkage. It could be due to damage, clerical error, or goods being lost or stolen.

This affects the profitability of the business especially when shrinkage is large. Retailers tend to increase price of goods to make up for shrinkage losses.

The entry to record shrinkage is the debit cost of goods sold and credit merchandise inventory.

PtichkaEL [24]4 years ago
7 0

Answer:

The journal entry made to record inventory shrinkage applies to many situations, e.g. theft, damage, miscounting, etc. Inventory shrinkage should not be recorded as cost of goods sold unless the loss has been identified and it results from natural occurring causes, e.g. evaporation of liquids. In this case, the most probable cause is theft since it is a gift store. So the journal entry should be:

Dr Inventory shrinkage expense 500

    Cr Merchandise inventory 500

Explanation:

Inventory shrinkage results from a difference between what should the inventory and what it really is. In this case the shrinkage = $20,000 - $19,500 = $500.

This account has a debit balance because it is considered an expense, and it should be used whenever the cause of the shrinkage was not a natural occurring event.

This account is different from an inventory write down used for rotten or expired products since you know the amount of rotten or expired products and why that happened, they are not missing.

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8 0
3 years ago
A company had the following assets and liabilities at the beginning and end of the current year:
const2013 [10]

Answer:

$32,300

Explanation:

Begining equity = Begining asset - Begining liabilities

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Ending equity = Ending asset - Ending liabilities

                        = $262,000 - $78,400 = $183,600

We will find the net income for the year using the below formula:

Ending equity = Begining equity + Stock issuance + Net income - Dividend paid, or:

$183,600 = $134,500 + 23,500 + Net income - $6,700.

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6 0
3 years ago
The current and quick ratios help us measure a firm's liquidity. The current ratio measures the relationship of the firm's curre
inysia [295]

Answer:

True

Explanation:

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Current ratio = (Total Current assets ÷ total current liabilities )

Quick Ratio: The quick ratio shows a relationship between the quick assets and the current liabilities. The formula is shown below:

Current ratio = (Quick assets ÷ total current liabilities)

where,

Quick assets = Current assets - inventories - prepaid insurance

So, the given statement is true

8 0
3 years ago
Brief exercise 1-9 at the beginning of the year, morales company had total assets of $816,000 and total liabilities of $526,000.
kramer

<u>Calculation of amount of stockholders' equity at the end of the year:</u>


At the beginning of the year, Morales Company had total assets of $816,000 and total assets increased $178,000 during the year, hence Total Assets at the end of the year shall be 816000+178000 = $994,000


At the beginning of the year, Morales Company had total liabilities of $526,000 and total liabilities decreased $82,000 during the year. Hence Total Liabilities at the end of the year shall be 526000-82000 = $444,000


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Equity = Assets – Liabilities

= 994,000-444,000

= $550,000


Hence, the amount of stockholders' equity at the end of the year shall be <u>$550,000</u>


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