If the Physical Count of the Inventory Revealed $72,000 of Merchandise

question 142

Multiple Choice

If the physical count of the inventory revealed $72,000 of merchandise on hand and the inventory records reported $73,200, what would be the necessary adjusting entry to record inventory shortage?

• A) Merchandise inventory debit $72,000; Cost of Merchandise Sold credit $72,000.
• B) Merchandise inventory debit $1,200; Cost of Merchandise Sold credit $1,200.
• C) Cost of Merchandise Sold debit $73,200; Merchandise Inventory credit $72,000.
• D) Cost of Merchandise Sold debit $1,200; Merchandise Inventory credit $1,200.

---

Definitions:

Work in Process

Inventory items that are partially completed goods, still undergoing manufacturing processes.

Materials Costs

The total expenses incurred for the materials used in the production process or in the provision of services.

Ending Work in Process

The value of goods that are in the process of being manufactured but are not yet complete at the end of an accounting period.

Materials

Refers to the raw inputs, supplies, or components used in the manufacturing or production process to create finished goods.