Question

14) Gift Shops Unlimited's unadjusted Merchandise Inventory at December 31, 2019 was $7,600. The cost associated with the physical count of inventory on hand on December 31, 2019 was $7,350. In addition, Gift Shops Unlimited estimated approximately $800 of merchandise sold on account will be returned with a cost of $450. Assume a perpetual inventory system is used. Requirements: 1. Journalize the adjustment for inventory shrinkage. Omit explanation. 2. Journalize the adjustment for estimated sales returns. Omit explanation.

Answer 1

Gift Shops Unlimited

Adjustment Entries:

Adjustment Entries -
Date	Account Titles and Explanation	Ref. No.	Debit	Credit
	Cost of Goods Sold		$250
	Merchandise Inventory			$250
	(To record inventory shrinkage $7,600 - $7,350 = $250)
	Sales return and allowances		$800
	Accounts Receivable			$800
	(To record sales returns)
	Merchandise Inventory		$450
	Cost of Goods Sold			$450
	(To record cost of goods returned)