The trial balance of Premier Lighting Co. shows Merchandise Inventory of $35,000. Based on a count taken on December 31, merchandise inventory at the end of the year actually totaled
$28,000. The adjusting entry to record the new merchandise inventory balance assuming the company uses the periodic inventory system would be:

Question

Quizplus · Accepted Answer

Since the merchandise inventory count showed a lower balance of $28,000 compared to the balance in the trial balance of $35,000, the merchandise inventory account needs to be reduced by the difference of $7,000. The adjusting entry would be a debit to Merchandise Inventory for $28,000 (to reduce the balance) and a credit to Income Summary for $28,000 (to record the decrease in inventory as an expense). Therefore, option B is the correct answer. Options A, C, and D do not reflect the correct adjustments needed for the periodic inventory system.

The Trial Balance of Premier Lighting Co