Question

The trial balance of Premier Lighting Co. shows Merchandise Inventory of $35,000. Based on a count taken on December 31, merchandise inventory at the end of the year actually totaled $28,000. The adjusting entry to record the new merchandise inventory balance assuming the company uses the periodic inventory system would be:___________________.a) a debit to Income Summary of $28,000 and a credit to Merchandise Inventory for $28,000.
b) a debit to Merchandise Inventory of $28,000 and a credit to Income Summary for $28,000.
c) a debit to Purchases of $35,000 and a credit to Merchandise Inventory for $35,000.
d) a debit to Income Summary of $35,000 and a credit to Merchandise Inventory for $35,000

Answer 1

Answer:

The right answer is a debit to Income statement of $7,000 and a Credit to Merchandise Inventory of $7,000. None of the options is right.

Explanation:

Merchandise Inventory per trial balance = $35,000

Merchandise inventory at the end of the year actually = $28,000

Difference = $35,000 - $28,000

                  = $7,000

Adjusting entries required to write down inventory

Debit Income statement   $7,000

Credit Merchandise Inventory  $7,000

Being entries to write down inventory.

The right answer is a debit to Income statement of $7,000 and a Credit to Merchandise Inventory of $7,000.