Question

Morgan St. Book​ Shop's unadjusted Merchandise Inventory at June ​30, 2018 was $5,000. The cost associated with the physical count of inventory on hand on June ​30, 2018​, was 4,550. In​ addition, Morgan St. Book Shop estimated approximately 1,100 of merchandise sold will be returned with a cost of $750.

Requirements

1.	Journalize the adjustment for inventory shrinkage.
2.	Journalize the adjustment for estimated sales returns.

Answer 1

	Date	Account Title	Debit	Credit
1	June 30, 2018	Inventory Shrinkage Expense (Note 1)	$450
		Inventory		$450
		(To record inventory shrinkage)
2	June 30, 2018	Sales Return and Allowances	$1,100
		Allowance for Sales Return and allowances		$1,100
		(To record estimated sales return)
	June 30, 2018	Inventory	$750
		Cost of sales on estimated returns		$750
		(To record estimated cost of sales on estimated return)
	Note 1: Inventory shrinkage is the shortage of inventory in physical count when compared with the system records