Salem Computers Merchandise Inventory account at year-end is showing a balance of $ 44 comma 000. The physical count of inventory came up with $ 42 comma 800. Journalize the adjusting entry needed to account for the inventory shrinkage. The company uses the perpetual inventory system.

The journal entry is shown below:

Cost of goods sold A/c Dr $1,200

To Merchandise inventory A/c $1,200

(Being the shrinkage inventory is recorded)

The computation is shown below:

= $44,000 - $42,800

= $1,200

We simply debited the costs of goods sold and credited the merchandise inventory so that the correct posting can be done