Homework Answers
The physical inventory count is less than the balance reflecting in Merchandise Inventory account.
Difference between physical count and balance in Merchandise Inventory account = $66,600 - $63,400 = $3,200
Since the balance in Merchandise Inventory account is higher than physical inventory account, we will need to bring the balance in the Merchandise Inventory account to the same amount as physical inventory count. So, for that we need to debit the Cost of Goods Sold. The Merchandise Inventory account needs to decrease, hence it needs to be credited with $3,200.
Hence, the correct answer is Option B. Cost of goods sold should be debited and a credit to Merchandise Inventory with the amount of $3,200.
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