Madison Company's perpetual inventory records indicate that $875,300 of merchandise should be on hand on October 31. The physical inventory indicates that $781,900 is actually on hand. Journalize the adjusting entry for the i nventory shrinkage for Madison Company for the year ended October 31.

Madison Company's Journal entry

Dec. 31

Dr Cost of Merchandise Sold 93,400

($875,300-$781,900)

Cr Merchandise Inventory 93,400

Explanation:

If the perpetual inventory records $875,300 of merchandise while the physical inventory indicates $781,900 which means we have to deduct $781,900 from $875,300 which made us to arrived at $93,400 as Debited Cost of Merchandise Sold and as Credited Merchandise Inventory .

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