The Peggy Ahlers Company uses the perpetual inventory system and the FIFO method. At the end of the fiscal year, December 31, 2015, the company conducted a physical count of the inventory on hand at all warehouses and stores. The FIFO cost of the physical count is $1,005,400. According to the records, ending inventory using FIFO is $1,122,000. Which journal entry is required at December 31, 2015?
A) No journal entry is required.
B) Debit Inventory $116,600 and credit Allowance to Reduce Inventory $116,600.
C) Debit Cost of Goods Sold $116,600 and credit Allowance to Reduce Inventory $116,600.
D) Debit Loss on Inventory Shortage $116,600 and credit Inventory $116,600.

Question

Quizplus · Accepted Answer

The physical count shows less inventory than the records, indicating a shortage. The entry adjusts the inventory account and recognizes the loss.

The Peggy Ahlers Company Uses the Perpetual Inventory System and the FIFO