The general ledger shows a balance of $66,600 in the Merchandise Inventory account at the end of the period.The physical inventory count shows inventory of $63,400.(Assume a perpetual inventory system. )The adjusting entry includes a ________.
A)debit to Cost of Goods Sold and a credit to Merchandise Inventory for $3,200
B)debit to Cost of Goods Sold and a credit to Cash for $3,200
C)debit to Merchandise Inventory and a credit to Cost of Goods Sold for $3,200
D)debit to Merchandise Inventory and a credit to Cash for $3,200

Question

Quizplus · Accepted Answer

The physical inventory count is lower than the balance in the Merchandise Inventory account, indicating that some of the inventory has been sold but not yet recorded in the accounting system. To adjust the balance, the Cost of Goods Sold account must be debited and the Merchandise Inventory account must be credited for the difference between the physical count and the balance in the ledger, which is $3,200 ($66,600 - $63,400). Therefore, the adjusting entry includes a debit to Cost of Goods Sold and a credit to Merchandise Inventory for $3,200.

The General Ledger Shows a Balance of $66,600 in the Merchandise