The general ledger shows a balance of $65,300 in the Inventory account at the end of the period.A physical inventory shows a count of $67,900.The adjusting entry would be a:
A) debit to Cost of goods sold and a credit to Inventory.
B) debit to Cost of goods sold and a credit to Cash.
C) debit to Inventory and a credit to Cost of goods sold.
D) debit to Inventory and a credit to Cash.

Question

Quizplus · Accepted Answer

Since the physical inventory count is more than the balance in the Inventory account, it means that there is more inventory on hand than what was recorded in the account. To adjust for this, the Inventory account should be debited to increase the balance to the actual amount ($67,900), and the difference should be credited to Cost of goods sold to reduce the amount recognized as a expense. Therefore, the adjusting entry would be a debit to Inventory and a credit to Cost of goods sold.

The General Ledger Shows a Balance of $65,300 in the Inventory