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

question 90

Multiple Choice

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

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

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Definitions:

Asset Account

An asset account is a category in accounting that represents resources owned or controlled by a company that have future economic value.

Five-Step Model

A framework used in revenue recognition, specifying the steps to be followed to accurately recognize revenue according to accounting standards.

Transaction Price

The amount of consideration expected to be received from a customer in exchange for transferring goods or services.

Multiple-Step Statement

A multiple-step statement is an income statement format that separates operating revenues and expenses from non-operating ones, providing detailed insight into a company's financial performance.