50.1K

Verified Solution

Link Copied!

"A merchandising companys ledger on May 31, its fiscal year-end, includes the following selected accounts that have normal balances (it uses the perpetual inventory system). A physical count of its May 31 year-end inventory reveals that the cost of the merchandise inventory still available is $718. (a) Prepare the entry to record any inventory shrinkage. (b) Prepare journal entries to close the balances in temporary revenue and expense accounts. Recording Shrinkage and Closing Process P3 Merchandise inventory.......... $756 Sales returns and allowances......... $130 Z. Zee, Capital............... 2,306 Cost of goods sold................. 2,100 Z. Zee, Withdrawals........... 140 Depreciation expense............... 206 Sales........................ 3,204 Salaries expense.................... 650 Sales discounts................ 94 Other operating expenses........... 100 Solution May 31 Cost of Goods Sold............................ 38 Merchandise Inventory...................... 38 To adjust for shrinkage based on physical count [$756 2 $718]. May 31 Sales......................................... 3,204 Income Summary.......................... 3,204 To close temporary accounts with credit balances."

FED-TO-KNOW 5-3 A merchandising company's ledger on May 31, its fiscal year-end, includes the following selected ac- counts that have normal balances (it uses the perpetual inventory system). A physical count of its May 31 Recording Shrinkage year-end inventory reveals that the cost of the merchandise inventory still available is $718. (a) Prepare the entry to record any inventory shrinkage. (b) Prepare journal entries to close the balances in temporary and Closing Process P3 revenue and expense accounts Sales returns and allowances . . . . . . $ 130 140 3,204 94 650 100 Other operating expenses.... Solution May 3I 38 Merchandise Inventory To adjust for shrinkage based on physical count $756 $718] 38 May 3 I Sales 3,204 3,204 To close temporary accounts with credit balances. [continued on next page

Answer & Explanation Solved by verified expert

See Answer