Question

Juan Morales Company had the following account balances at year-end: Cost of Goods Sold $60,000; Inventory $15,000; Operating Expenses $29,000; Sales Revenue $115,000; Sales Discounts $1,200; and Sales Returns and Allowances $1,700. A physical count of inventory determines that merchandise inventory on hand is $13,900.

Prepare the adjusting entry necessary as a result of the physical count.

Answer 1

Step-by-step explanation:

The adjusting entry is as follows

Cost of inventory A/c Dr $1,100

To Inventory A/c $1,100

(Being the merchandise inventory is adjusted)

The computation of the adjusted merchandise inventory is shown below:

= Inventory - Merchandise inventory on hand

= $15,000 - $13,900

= $1,100

While recording this entry, we debited the cost of goods sold and credited the inventory account for $1,100 each