learning objective 5 4 1 the loss of inventory that occurs because of theft damage a 4306743

learning objective 5 4 1 the loss of inventory that occurs because of theft damage a 4306743

Learning Objective 5-4

1) The loss of inventory that occurs because of theft, damage, and errors is referred to as inventory shrinkage.

2) When a company uses the perpetual inventory system, there is no need to conduct a physical count of inventory.

3) The entry to close Sales Discounts will include a debit to Income Summary.

4) If a physical count of inventory indicates that the Merchandise Inventory account is overstated, an additional adjusting entry is required to record the difference.

5) The entry to close Cost of Goods Sold includes a debit to Income Summary.

6) The inventory account balance is $50,000. An actual count of inventory reveals that actual inventory is $43,000. Which of the following would be included in the adjusting entry? (Assume a perpetual inventory system)

A) a $43,000 credit to Merchandise Inventory

B) a $50,000 debit to Cost of Goods Sold

C) a $7,000 credit to Cost of Goods Sold

D) a $7,000 credit to Merchandise Inventory

7) The Merchandise Inventory account of a company shows a balance of $50,000 but a physical count of inventory shows $48,000. Which of the following entries is required to record the shrinkage? (Assume a perpetual inventory system)

A)

Cost of Goods Sold

2,000

       Shrinkage Expense

2,000

B)

Merchandise Inventory

2,000

       Cost of Goods Sold

2,000

C)

Cost of Goods Sold

2,000

       Merchandise Inventory

2,000

D)

Cash

2,000

       Merchandise Inventory

2,000

8) The revenue, expenses, Sales Returns and Allowances, and Sales Discounts will be closed via the ________.

A) Income Summary account

B) Retained Earnings account

C) Dividend account

D) Fixed asset account

9) The general ledger shows a balance of $67,900 in the Merchandise Inventory account at the end of the period. The physical inventory count shows inventory of $65,300. The adjusting entry includes a ________.

A) debit to Cost of Goods Sold and a credit to Merchandise Inventory for $2,600

B) debit to Cost of Goods Sold and a credit to Cash for $2,600

C) debit to Merchandise Inventory and a credit to Cost of Goods Sold for $2,600

D) debit to Merchandise Inventory and a credit to Cash for $2,600

10) The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed. Which of the following is to be credited to close the Income Summary account?

A) Dividends

B) Sales Revenue

C) Cost of Goods Sold

D) Retained Earnings

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