If the physical count of inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000, what would be the necessary adjusting entry to record inventory shrinkage?
A) debit Merchandise Inventory, $158,000; credit Cost of Merchandise Sold, $158,000
B) debit Merchandise Inventory, $5,000; credit Cost of Merchandise Sold, $5,000
C) debit Cost of Merchandise Sold, $163,000; credit Merchandise Inventory, $158,000
D) debit Cost of Merchandise Sold, $5,000; credit Merchandise Inventory, $5,000
Correct Answer:
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