A company's ledger shows an Inventory balance of $20,000 and a physical count of the inventory shows $19,000.Which of the following entries is needed to record the shrinkage?
A) $$\begin{array} { | l | r | r | }
\hline \text { Cost of goods sold } & 1,000 & \
\hline \text { Shrinkage expense } & & 1,000 \
\hline
\end{array}$$
B) $$\begin{array} { | l | r | r | }
\hline \text { Inventory } & 1,000 & \
\hline \text { Cost of goods sold } & & 1,000 \
\hline
\end{array}$$
C) $$\begin{array} { | l | r | r | }
\hline \text { Cost of goods sold } & 1,000 & \
\hline \text { Inventory } & & 1,000 \
\hline
\end{array}$$
D) $$\begin{array} { | l | r | r | }
\hline \text { Cash } & 1,000 & \
\hline \text { Inventory } & & 1,000 \
\hline
\end{array}$$

Question

A company's ledger shows an Inventory balance of $20,000 and a physical count of the inventory shows $19,000.Which of the following entries is needed to record the shrinkage?
A) $$\begin{array} { | l | r | r | } 
\hline \text { Cost of goods sold } & 1,000 & \
\hline \text { Shrinkage expense } & & 1,000 \
\hline
\end{array}$$
B) $$\begin{array} { | l | r | r | } 
\hline \text { Inventory } & 1,000 & \
\hline \text { Cost of goods sold } & & 1,000 \
\hline
\end{array}$$
C) $$\begin{array} { | l | r | r | } 
\hline \text { Cost of goods sold } & 1,000 & \
\hline \text { Inventory } & & 1,000 \
\hline
\end{array}$$
D) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 1,000 & \
\hline \text { Inventory } & & 1,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

To adjust the ledger to match the physical count, the inventory account must be decreased by $1,000, and the cost of goods sold (or a similar expense account, such as shrinkage expense) must be increased by the same amount to reflect the loss of inventory. This is accurately represented in option C, where Inventory is credited (decreased) and Cost of Goods Sold is debited (increased) by $1,000.

A Company's Ledger Shows an Inventory Balance of $20,000 and a Physical