The inventory records of Global Company indicate that $76,800 of merchandise should be on hand at the end of the month. The physical inventory indicates that $74,900 is actually on hand. The journal entry to adjust for inventory shrinkage will include a. a debit to Inventory for $1,900. b. a debit to Cost of Goods Sold for $1,900. c. a debit to Inventory for $74,900. d. None of these choices are correct, since no entry is needed.

B

Explanation:

In a Under Periodic Inventory System, the inventory quantities are updated at the end of the period taking physical inventory count.

There is no track exactly how many items where sold.

It is not know how many items are left until the count closing inventory.

Ecuation:

Inventory at the begining of the period

+

Purchases

-

Cost of goods sold

=

Inventory at the end of the period (the ending inventory is determined by a physical count and subtracted from the cost of goods sold)

In this case, the adjusting record is:

Inventory records of Global Company $76,800

-

Physical inventory $74,900

=

$1,900 a debit to Cost of Goods Sold