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Chapter 5: Q5-4TI (page 268)

Click Computers’ Merchandise Inventory account at year-end is showing a balance of \(43,000. The physical count of inventory came up with \)42,500. Journalize the adjusting entry needed to account for the inventory shrinkage. The company uses the perpetual inventory system.

Short Answer

Expert verified

The total debit and credit of the journal are $500.

Step by step solution

01

Meaning of Inventory Shrinkage

Inventory shrinkage refers to the loss of inventory for a business entity arising from theft, administrative error, and fraud. It represents the difference between actual inventory and inventory recorded in the books.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Inventory shrinkage expenses

500

Merchandise inventory

500

(To record the adjustment for inventory shrinkage)

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Most popular questions from this chapter

Consider the following transactions for Garman Packing Supplies:

Apr. 10 Garman Packing Supplies buys \(175,000 worth of merchandise inventory on account with credit terms of 1/10, n/30.

12 Garman returns \)15,200 of the merchandise to the vendor due to damage during shipment.

19 Garman paid the amount due, less the return and discount.

Requirements

1. Journalize the purchase transactions assuming Garman Packing Supplies uses the periodic inventory system. Explanations are not required.

2. What is the amount of net purchases?

What is a purchase return? How does a purchase allowance differ from a purchase return?

Under the new revenue recognition standard, what most companies do at the end of the period related to sales returns? Describe the journal entries that would be recorded.

Journalize the following transactions that occurred in March 2018 for Faucet. Assume Faucet uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Mar. 3 Purchased merchandise inventory on account from Sidecki Wholesalers, \(3,500. Terms 2/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)75 on March 3 purchase.

4 Purchased merchandise inventory for cash of \(2,200.

6 Returned \)800 of inventory from March 3 purchase.

8 Sold merchandise inventory to Harvey Company, \(5,700, on account. Terms 2/15, n/35. Cost of goods, \)2,508.

9 Purchased merchandise inventory on account from Teaton Wholesalers, \(6,000. Terms 2/10, n/30, FOB destination.

10 Made payment to Sidecki Wholesalers for goods purchased on March 3, less return and discount.

13 After negotiations, received a \)100 allowance from Teaton Wholesalers.

15 Sold merchandise inventory to Jackson Company, \(2,900, on account. Terms n/EOM. Cost of goods, \)1,276.

22 Made payment, less allowance, to Teaton Wholesalers for goods purchased on March 9.

25 Sold merchandise inventory to Secker for \(2,000 on account that cost \)880. Terms of 2/10, n/30 were offered, FOB shipping point. As a courtesy to Secker, $85 of freight was added to the invoice for which cash was paid by Faucet.

28 Received payment from Harvey Company.

29 Received payment from Secker, less discount.

30 Received payment from Jackson Company.

Journalize the following sales transactions for Austin Mall. Assume Austin Mall uses the gross method to record sales revenue. Explanations are not required.

Jan. 4 Sold \(10,000 of antiques on account, credit terms are 1/15, n/30. Cost of goods is \)5,000.

20 Austin Mall received payment from the customer on the amount due from Jan. 4.

20 Sold \(5,200 of antiques on account, credit terms are 1/10, n/45, FOB destination. Cost of goods is \)2,600.

20 Austin Mall paid $120 on freight out.

29 Received payment from the customer on the amount due from Jan. 20, less the discount.
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