Question

In a perpetual inventory system, the entry that adjusts the Merchandise Inventory account based on the...

In a perpetual inventory system, the entry that adjusts the Merchandise Inventory account based on the physical count equals the merchandise inventory balance before adjustment less actual merchandise inventory on hand.

True

False

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Answer #1

Ans is True,

Explanation: Under perpetual inventory system , inventory should reflect the current quantity that is in our stock and if any shortfall occurs, the amount of adjusting entry would be calculated as follows:

Adjusting entry= Merchandise inventory balance before adjustment - Actual merchandise inventory on hand

Suppose Merchandise inventory before adjustment is $500 and actual in our hand is only 480

Then $500-$480 = $20 amount adjustment entry wll be passed as follows:

Debit= Cost of goods sold 20

Credit= Merchandise inventory 20

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