6/23/20, 12:12 PM

Adjusting Entry for Merchandise Inventory Shrinkage

Paragon Tire Co.'s perpetual inventory records indicate that $771,500 of merchandise should be on hand on March
31, 2019. The physical inventory indicates that $732,930 of merchandise is actually on hand.

Journalize the adjusting entry for the normal inventory shrinkage for Paragon Tire Co. for the year ended March
31, 2019.

✔
Cost of Merchandise Sold ✔ 38,570

✔
Merchandise Inventory ✔ 38,570

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Inventory shrinkage is recorded by decreasing merchandise inventory and increasing cost of merchandise
sold for the difference between the perpetual inventory records and the physical inventory on hand.
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Post-Submission
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Inventory shrinkage ($771,500 – $732,930) = $38,570

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Solution

Adjusting Entry for Merchandise Inventory Shrinkage

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Paragon Tire Co.'s perpetual inventory records indicate that $771,500 of merchandise should be on hand
ar stu

on March 31, 2019. The physical inventory indicates that $732,930 of merchandise is actually on hand.

Journalize the adjusting entry for the normal inventory shrinkage for Paragon Tire Co. for the year ended
sh is

March 31, 2019.

Th

Cost of Merchandise Sold 38,570

Merchandise Inventory 38,570

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