A company used a perpetual inventory system. By physical count, ending Merchandise Inventory is $90,200. The balance in the Merchandise Inventory account is $93,700. The adjusting entry is
A)debit to Income Summary, $3,500; credit Merchandise Inventory, $3,500.
B)debit to Merchandise Inventory, $3,500; credit Income Summary, $3,500.
C)debit to Cost of Goods Sold, $3,500; credit Merchandise Inventory, $3,500.
D)debit to Income Summary, $3,500; credit Cost of Goods Sold, $3,500.
E)debit to Merchandise Inventory, $3,500; credit Cost of Goods Sold, $3,500.

Question

Quizplus · Accepted Answer

The adjusting entry should decrease the Merchandise Inventory account to match the physical count, which is done by debiting Cost of Goods Sold and crediting Merchandise Inventory for the difference of $3,500.

A Company Used a Perpetual Inventory System