Question

The Merchandise Inventory account balance is $56.000. A physical count of inventory reveals that the actual inventory balance is $39.000. Which of the following would be included in the aduingebry Assume a perpetual inventory system) O A a $39,000 credit to Merchandise Inventory OB. a $17.000 credit to Cost of Goods Sold Oc. a $56,000 debit to Cost of Goods Sold OD. a $17.000 credit to Merchandise Inventory

Answer 1

Solution :

As per the information given in the question we have

Actual merchandise Inventory is worth = $ 39,000

Amount debited to the merchandise inventory account = $ 56,000

Thus an excess of ( $ 56,000 - $ 39,000 ) = $ 17,000 has been debited to the merchandise inventory account.

This excess debit to the merchandise inventory has to corrected by crediting the same account with $ 17,000

The adjusting entry for the same shall be

Cost of goods sold account Dr     $ 17,000

                         To Merchandise inventory account Cr   $ 17,000

Thus the adjusting entry will include a credit of $ 17,000 to the Merchandise inventory account, to reverse the effect of excess amount debited ( discovered during physical inventory verification )

Thus the solution is Option D. a $ 17,000 credit to Merchandise Inventory

The other options are incorrect for the following reasons :

A. a $ 39,000 credit to Merchandise Inventory

The excess debit to merchandise Inventory is = $ 17,000. Thus the adjusting entry should be a credit of $ 17,000 to the merchandise inventory account, and not $ 39,000. Hence, this option is incorrect.

B.a $ 17,000 credit to Cost of goods sold

The adjusting entry shall include a debit of $ 17,000 to the cost of goods sold account and not a credit of the same amount. Hence, this option is incorrect.

C. a $ 56,000 debit to Cost of goods sold

The adjusting entry shall include a debit of $ 17,000 to the cost of goods sold account. Hence , this option is incorrect.