"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?"

Answer and Explanation:

Given:

Merchandise Inventory balance = $8,000

Goods on hand = $7,400

Adjustment entry:

                             Books of (--- limited)

                                   Journal entry                                              

Date        Account Title and Explanation       Debit    Credit    

           Cost of Goods Sold          A\c Dr.       $600

            Merchandise Inventory    A\c Cr.                      $600

(Being Inventory recorded under perpetual inventory system)

Note: Cost of goods sold adjusted = $8,000 - $7,400 = $600

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