Question

If the physical count of inventory showed $158,000 of inventory on hand and the inventory records reported $163,000, what would be the necessary adjusting entry to record inventory shrinkage? a. debit cost of Goods Sold, $163,000; credit Inventory, $158,000 b. debit Inventory, $5,000; credit Cost of Goods Sold, $5,000 c. debit cost of Goods Sold, $5,000; credit Inventory, $5,000 d. debit Inventory, $158,000; credit Cost of Goods Sold, $158,000

Answer 1

Answer:

C. Debit Cost of goods Sold $5,000;

Credit Inventory $5,000

Explanation:

Preparation of the necessary adjusting entry to record inventory shrinkage

Since  we assumed  that the physical count of inventory showed $158,000 of inventory on hand and the inventory records reported $163,000 the first step to do is to find the difference  between the two amount which is ($163,000-$58,000) given us a different of $5,000 which will now be recorded as:

Debit Cost of goods Sold $5,000

(163,000-158,000)

Credit Inventory $5,000