Gruver Company maintains perpetual inventory records. The company's inventory account had a $5,500 balance as of December 31, 2014. On that date, a physical count of inventory showed only $5,300 of merchandise in stock. The write-down to recognize the missing inventory will

Question

Quizplus · Accepted Answer

The write-down will decrease assets because inventory is an asset. It will increase expense because the loss is recorded as an expense. It will decrease equity because expenses reduce net income, which in turn reduces retained earnings, a component of equity.

Gruver Company Maintains Perpetual Inventory Records