Question

1. The trial balance for a merchandiser, before the journal entries below, is as follows. A physical count of inventory at the end of the accounting year reveals $28,000 of inventory on hand. (Assume a perpetual inventory system.)

	Debit		Credit
cash	$12,600
accounts Receivable	2400
re aid Rent	800
merchandise Inventory	30,000
accounts Payable			42000
Salaries Payable			1,000
Notes Pa able			800
yung Capital			13,800
yung , Withdrawals	1,000
Sales Revenue			96,000
cost of Goods Sold	23,000
deliver Expense	2,000
Salaries Expense	21,000
Rent Expense	14,000
selling Expense	8,500
u lies Expense	500
tOtal		1,15,800		1,15,800

Prepare the journal entry to record the inventory shrinkage and prepare all closing entries

Answer 1

Inventory shrinkage and closing entries:

Account title and Explanation	Debit	Credit
Cost of goods sold*	$2,000
Inventory		$2,000
[To record inventory shrinkage]
Sales revenue	$96,000
Income summary		$96,000
[To close revenue accounts]
Income summary	$71,000
Cost of goods sold [23000+2000shrinkage]		$25,000
Delivery expense		$2,000
Salaries expense		$21,000
Rent expense		$14,000
Selling expense		$8,500
Utilities expense		$500
[To close expenses accounts]
Income summary [96000-71000]	$25,000
Yung, Capital		$25,000
[To close income summary account]
Yung, capital	$1,000
Yung, withdrawals		$1,000
[To close withdrawals account]

*Inventory shrinkage = Inventory as per books - Physical count = $30,000 -$28,000 = $2,000