Nix\'lt Company\'s ledger on July 31, its fiscal year-end, includes the followin

Question

Nix'lt Company's ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix'lt uses the perpetual inventory system) Merchandise inventory $43,800 Retained earnings Dividends Sales Sales discounts Sales returns and allowances $ 5,300 108,600 127,300 Cost of goods sold 7,000 Depreciation expense 160,600 Salaries expense 11,500 38,500 4100 Miscellaneous expenses 5,000 A physical count of its July 31 year-end inventory discloses that the cost of the $42.050. Prepare the entry to record any chandise inventory inventory shrinkage. still available is View transaction list

Explanation / Answer

Inventory shrinkage = 43800 - 42050 = $1,750

Inventory shrinkage is an expense and so it should be debited and since the value if inventory is going to reduce merchandise inventory account should be credited.

So the entry as on July 31 would be:

Shrinkage expense A/c Dr $1,750

To Merchandise Inventory A/c. $1,750

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