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18 June, 09:43

Suppose Dave's Discount's Merchandise Inventory account showed a balance of $8,000 before the year-end adjustments. The physical count of goods on hand totaled $7,400. Dave uses a perpetual inventory system. To adjust the accounts, which entry would the company make? Date Accounts and Explanation Debit Credit A. Accounts Payable 600 Merchandise Inventory 600 B. Merchandise Inventory 600 Accounts Receivable 600 C. Merchandise Inventory 600 Cost of Goods Sold 600 D. Cost of Goods Sold 600 Merchandise Inventory 600

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  1. 18 June, 10:03
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    D. Cost of Goods Sold 600 Merchandise Inventory 600

    Explanation:

    In the perpetual system, inventory balance is adjusted after a count to ensure that the book balance is the same as the physical inventory balance.

    Hence if the book balance is $8,000 and the physical count showed $7,400 then adjustments required

    = $8,000 - $7,400

    = $600

    To adjust for this

    Debit Cost of Goods Sold $600

    Credit Merchandise Inventory $600
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