If Shrinkage Is Found for $400, an Adjusting Entry Would

question 140

Multiple Choice

If shrinkage is found for $400, an adjusting entry would be made as follows:

• A)debit Inventory for $400; credit Cost of Goods Sold for $400.
• B)debit Inventory for $400; credit Sales Returns and Allowances for $400.
• C)debit Cost of Goods Sold for $400; credit Inventory for $400.
• D)debit Sales Returns and Allowances for $400; credit Inventory for $400.

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Definitions:

Retention Ratio

The proportion of earnings that is not distributed as dividends to shareholders, but is retained by the company for reinvestment.

Cash Dividends

Distributions of profits from a corporation to its shareholders as payments.

Selling and Administrative Expenses

Indirect costs not directly tied to product production, including marketing, management, rent, and utilities.

Significance Level

A threshold in statistical hypothesis testing that determines the probability of rejecting the null hypothesis when it is actually true.