If the Physical Count of the Inventory Revealed $158,000 of Merchandise

question 158

Multiple Choice

If the physical count of the inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000,what would be the necessary adjusting entry to record inventory shrinkage?

• A)debit Merchandise Inventory,$158,000; credit Cost of Merchandise Sold,$158,000
• B)debit Merchandise Inventory,$5,000; credit Cost of Merchandise Sold,$5,000
• C)debit Cost of Merchandise Sold,$163,000; credit Merchandise Inventory,$158,000
• D)debit Cost of Merchandise Sold,$5,000; credit Merchandise Inventory,$5,000

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Definitions:

Supply Equation

A mathematical expression that shows the relationship between the quantity of a good that producers are willing to sell and factors that influence this quantity, such as price.

Price Floor

A government or group-imposed price control that sets the lowest legal price a commodity can be sold at. It is used to ensure producers receive a minimum price often in agriculture.

Shortage/Surplus

Shortage occurs when demand exceeds supply, while surplus occurs when supply exceeds demand.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a market.