Question

Adjusting Entry for Merchandise Inventory Shrinkage Paragon Tire Co.'s perpetual inventory records indicate that $787,690 of merchandise should be on hand on March 31, 2019. The physical inventory indicates that $764,060 of merchandise is actually on hand. Journalize the adjusting entry for the normal inventory shrinkage for Paragon Tire Co. for the year ended March 31, 2019.

Answer 1

Answer:

Dr. Cost of Goods Sold  $23,630

Cr. Inventory                    $23,630

Explanation:

The difference in the physical inventory available and the inventory in the accounting records should be adjusted and recorded. The cost of Inventory loss should be adjusted in the cost of goods sold account and Inventory level in the system should be reconciled with the physical count of the inventory.

Inventory according to record = $787,690

Physical Inventory = $764,060

Adjustment = $787,690 - $764,060 = $23,630