At the end of its accounting year, Getz Corporation's physical inventory count indicated that 543,345 units of inventory, costing $1.50 each were on hand.The company's perpetual inventory system reported a balance of $817,135. The year end adjusting entry is:
A)Debit inventory and credit "inventory over and short" $2,117.50
B)Debit "inventory over and short" and credit inventory $2,117.50
C)Debit inventory and credit "inventory over and short" $273,790
D)Debit "inventory over and short" and credit inventory $273,790

Question

Quizplus · Accepted Answer

Since the physical inventory count and perpetual inventory system do not match, there is a difference of $273,790 ($817,135 - ($1.50 x 543,345)) in the recorded inventory balance. This difference is recorded in a contra inventory account called "inventory over and short." The adjusting entry to account for this difference is to debit "inventory over and short" and credit inventory. Therefore, the correct answer is B.

At the End of Its Accounting Year, Getz Corporation's Physical