Question

Madison Company's perpetual inventory records indicate that $875,300 of merchandise should be on hand on October 31. The physical inventory indicates that $781,900 is actually on hand.
Required:
Journalize the adjusting entry for the inventory shrinkage for madison company for the year ended October 31.

Answer 1

Answer:

Dr Cost of Goods Sold    $93,400

Cr Inventory                         $93,400

Explanation:

The closing inventory in perpetual inventory is $875,300 which is recorded in excess of its inventory in hand $781,900 which means that additional $93,400 must be adjusted in Cost of Goods Sold.

The journal entry on October 31, 2020, is given as under:

Dr Cost of Goods Sold    $93,400

Cr Inventory                         $93,400