Question

Suppose​ Dave's Discount's Merchandise Inventory account showed a balance of​ $8,000 before the​ year-end adjustments. The physical count of goods on hand totaled​ $7,400. Dave uses a perpetual inventory system. To adjust the​ accounts, which entry would the company​ make?

Answer 1

Answer:

Db Cost of Goods Sold_____600

Cr Merchandise Inventory ______600

Explanation:

A perpetual inventory system has the advantages of both providing up-to-date inventory balance information and requiring a reduced level of physical inventory counts. However, the calculated inventory levels derived by a perpetual inventory system may gradually diverge from actual inventory levels, due to unrecorded transactions or theft, so you should periodically compare book balances to actual on-hand quantities (typically using cycle counting) and adjust the book balances as necessary.