The inventory account balance is $50,000. An actual count of inventory reveals that actual inventory is $43,000. Which of the following would be included in the adjusting entry? (Assume a perpetual inventory system)
A)a $43,000 credit to Merchandise Inventory
B)a $50,000 debit to Cost of Goods Sold
C)a $7,000 credit to Cost of Goods Sold
D)a $7,000 credit to Merchandise Inventory

Question

Quizplus · Accepted Answer

Since the actual inventory is less than the recorded inventory, the adjusting entry will have to reduce the Merchandise Inventory account by $7,000 (the difference between the recorded and actual inventory). This is accomplished by crediting Merchandise Inventory for $7,000. The corresponding debit must go to an expense account, and since this is a perpetual inventory system, the expense account is Cost of Goods Sold. Therefore, choice D is the correct answer.

The Inventory Account Balance Is $50,000