The Garrett Company uses the perpetual inventory system.Although its inventory records indicated $18,000 in the inventory,a physical count showed only $16,250.Which of the following answers indicates the effect of the necessary write-down entry?

Question

Quizplus · Accepted Answer

The necessary write-down entry would reduce the inventory value to the actual amount counted during the physical count. Therefore, the inventory account needs to be debited for $1,750 ($18,000 - $16,250), while the cost of goods sold (COGS) account needs to be credited for the same amount. Option A correctly reflects this entry. Option B is incorrect because it only debits the inventory account, but doesn't credit COGS. Option C is incorrect because it only credits COGS, but doesn't debit the inventory account. Option D is incorrect because it incorrectly credits the inventory account instead of debiting it.

The Garrett Company Uses the Perpetual Inventory System