The general ledger shows a balance of $67,000 in the Merchandise Inventory account at the end of the period.The physical inventory count shows inventory of $64,400.(Assume a perpetual inventory system.)The adjusting entry includes a ________.
A) debit to Cost of Goods Sold and a credit to Merchandise Inventory for $2,600
B) debit to Cost of Goods Sold and a credit to Cash for $2,600
C) debit to Merchandise Inventory and a credit to Cost of Goods Sold for $2,600
D) debit to Merchandise Inventory and a credit to Cash for $2,600

Question

Quizplus · Accepted Answer

Under a perpetual inventory system, when the physical inventory count is less than the general ledger balance, the difference is recorded as an adjustment to align the ledger with the actual inventory count. This adjustment decreases the Merchandise Inventory account and increases the Cost of Goods Sold, reflecting the loss or shrinkage of inventory. Therefore, a debit to Cost of Goods Sold and a credit to Merchandise Inventory for the difference ($2,600) is the correct entry.

The General Ledger Shows a Balance of $67,000 in the Merchandise