A Company's Ledger Shows an Inventory Balance of $20,000 and a Physical

question 13

Multiple Choice

A company's ledger shows an Inventory balance of $20,000 and a physical count of the inventory shows $19,000.Which of the following entries is needed to record the shrinkage?

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Cost of goods sold } & 1,000 & \\
• \hline \text { Shrinkage expense } & & 1,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Inventory } & 1,000 & \\
• \hline \text { Cost of goods sold } & & 1,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Cost of goods sold } & 1,000 & \\
• \hline \text { Inventory } & & 1,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 1,000 & \\
• \hline \text { Inventory } & & 1,000 \\
• \hline
• \end{array}\]

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Definitions:

Machine-Hours

A measure of the amount of time machines are used in the production process, often used as a basis for allocating overhead costs.

Overhead Applied

The portion of overhead costs allocated to a specific job or project based on a predetermined rate.

Machining Department

A segment of a manufacturing facility where machining processes such as cutting, drilling, or shaping materials are performed.

Machine-Hours

A measure of production time referring to the total hours that machinery is in use during the manufacturing process.