Armstrong Company maintains perpetual inventory records.The company's inventory account had a $6,500 balance as of December 31,2012.On that date,a physical count of inventory showed only $6,100 of merchandise in stock.The write-down to recognize the missing inventory will

Question

Quizplus · Accepted Answer

The write-down to recognize the missing inventory will result in an increase in the expense of the company, known as the inventory shrinkage expense. This expense will reduce the company's net income, which in turn reduces equity. However, it will have no effect on assets since the physical inventory count already reflects the decrease in inventory.

Armstrong Company Maintains Perpetual Inventory Records