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Nix’It Company’s ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix’It uses the perpetual inventory system).

Merchandise inventory	$	45,300		Sales returns and allowances	$	5,000
T. Nix, Capital		130,300		Cost of goods sold		109,500
T. Nix, Withdrawals		7,000		Depreciation expense		11,800
Sales		162,100		Salaries expense		40,000
Sales discounts		4,400		Miscellaneous expenses		5,000

A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $43,400.

Prepare the entry to record any inventory shrinkage.

Prepare journal entries to close the balances in temporary revenue and expense accounts. Remember to consider the entry for shrinkage from QS 5-9.

Answer 1

Journal entry

No	General Journal	Debit	Credit
	Cost of goods sold (45300-43400)	1900
	Inventory		1900
	(To record inventory shrinkage)

Journal entry

No	General Journal	Debit	Credit
1	Sales	162100
	Income summary		162100
	(To record revenue)
2	Income summary	177600
	Sales discount		4400
	Sales return and allowance		5000
	Cost of goods sold (109500+1900)		111400
	Depreciation expense		11800
	Salaries expense		40000
	Miscellaneous expense		5000
3	T. Nix, capital	15500
	Income summary		15500
4	T. Nix, capital	7000
	T. Nix, Withdrawals		7000