Question

Windsor, Inc. uses a perpetual inventory system and reported $501,000 of inventory at the beginning of the month based on a physical count of inventory. During the month, the company bought $49,000 of inventory and sold inventory that had cost $32,500. At the end of the month, the physical count of inventory shows $515,000 on hand. How much shrinkage occurred during the month

Answer 1

Answer:

$2,500

Explanation:

The computation of the inventory shrinkage occurred during the month is shown below:

As we know that

Opening inventory + purchases - sales = Ending inventory

$501,000 + $49,000 - $32,500 = ending inventory

Ending inventory = $517,500

And,

The Physical count of inventory = $515,000

So, the shrinkage occurred is

= Ending inventory - physical inventory

= $517,500 - $515,000

= $2,500