Armstrong Company maintains perpetual inventory records. The company's inventory account had a $6,500 balance as of December 31, 2014. On that date, a physical count of inventory showed only $6,100 of merchandise in stock. The write-down to recognize the missing inventory will

Question

Quizplus · Accepted Answer

The write-down to recognize the missing inventory will decrease the inventory account by $400 ($6,500 - $6,100) and will increase the cost of goods sold (expense) account by the same amount, reducing net income. Therefore, the correct choice is B, as it will increase expense.

Armstrong Company Maintains Perpetual Inventory Records