Jayson Products uses a perpetual inventory system.At year-end,the Inventory account had a balance of $280,000,but a complete year-end physical inventory indicated goods on hand costing only $273,000.Jayson should:
A)Reduce its cost of goods sold by $7,000.
B)Record a $7,000 current liability.
C)Reduce the balance in its Inventory control account and inventory subsidiary ledger by $7,000.
D)Reduce the balance in the Inventory control account and record a current liability,both in the amount of $7,000.

Question

Quizplus · Accepted Answer

Under a perpetual inventory system, the Inventory account is continuously updated to reflect inventory on hand. When the physical inventory indicates that the actual inventory on hand ($273,000) is less than the recorded amount ($280,000), the company should adjust the Inventory account to match the physical count. This means reducing the Inventory account by the difference of $7,000, without affecting the cost of goods sold or recording a current liability.

Jayson Products Uses a Perpetual Inventory System