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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Sales transactions

Journalize the following merchandise transactions:

a.    old merchandi.sc on account, $92,500 with terms 1/10, n/30. The cost of the merchandise sold was $55,500.

b.    Received payment less the discount.

c.    Issued a credit memo for returned merchandise that was sold for $10,400 terms n/30. The cost of the merchandise returned was $6,500.

To determine

Inventory Shrinkage: It represents the loss of inventory. In other words, it refers to the difference between the amount of inventory shown in the accounting records and the actual inventory. The difference indicates the issues with the inventory caused due to lost, theft, clerical errors, damaged goods or spoilage.

To Record: The adjusting entry for inventory shrinkage.

Explanation

Explanation

  • Cost of merchandise sold is an expense account and it decreases the value of equity by $23,250. Therefore, debit cost of merchandise sold account with $23,250.
  • Merchandise inventory is an asset and it is decreased by $23,250. Therefore, credit merchandise inventory account with $23,250.

Working Note:

Calculate the inventory shrinkage.

unadjusted merchandise inventory = $1,333,150

Physical count of inventory = $1,309,900

Inventory�

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