At the year-end,the perpetual inventory system of Horran Company indicated an ending inventory level of 190 units at a cost of $5 each.A physical count performed at year-end resulted in 184 units being on hand at a cost of $5 each.What journal entry,if any,is necessary at year-end?
A)No journal entry is necessary.
B)$\begin{array}{lcc}
\text { Inventory Shrinkage Expense} & 30 & \
\quad \text { Inventory} & &30 & \
\end{array}$

C)$\begin{array}{lccc}
\text { Cost of Goods Sold } & 30 \
\quad \text { Inventory Shrinkage Expense } & &30 & \
\end{array}$

D)$\begin{array}{lccc}
\text { Inventory Shrinkage Expense } & 30 \
\quad \text { Cost of Goods Sold } && 30 & \
\end{array}$

E)$\begin{array}{lccc}
\text { Inventory } & 30\
\quad\text { Cost of Goods Sold } && 30 \
\end{array}$

Question

At the year-end,the perpetual inventory system of Horran Company indicated an ending inventory level of 190 units at a cost of $5 each.A physical count performed at year-end resulted in 184 units being on hand at a cost of $5 each.What journal entry,if any,is necessary at year-end?
A)No journal entry is necessary. 
B)$\begin{array}{lcc}
\text {  Inventory Shrinkage Expense} & 30 &  \
\quad \text { Inventory} & &30 & \
\end{array}$

C)$\begin{array}{lccc}
\text {  Cost of Goods Sold } & 30 \
\quad \text { Inventory Shrinkage Expense } & &30 & \
\end{array}$

D)$\begin{array}{lccc}
\text {  Inventory Shrinkage Expense } &  30 \
\quad \text { Cost of Goods Sold } && 30 & \
\end{array}$

E)$\begin{array}{lccc}
\text {  Inventory } &  30\
\quad\text {  Cost of Goods Sold } &&  30 \
\end{array}$

Quizplus · Accepted Answer

The correct journal entry to adjust for the inventory discrepancy is to debit Inventory Shrinkage Expense and credit Inventory for the cost of the missing units (6 units at $5 each = $30). This reflects the loss of inventory not accounted for by sales.

At the Year-End,the Perpetual Inventory System of Horran Company Indicated Inventory Shrinkage Expense30 Inventory30\begin{array}{lcc}\text { Inventory Shrinkage Expense} & 30 & \\\quad \text { Inventory} & &30 & \\\end{array} Inventory Shrinkage Expense Inventory​30​30​​

At the Year-End,the Perpetual Inventory System of Horran Company Indicated $\begin{array}{lcc}\text { Inventory Shrinkage Expense} & 30 & \\\quad \text { Inventory} & &30 & \\\end{array}$