Chapter 5, Problem 10QS

Closing entries P3

Refer to QS 4-9 and prepare journal entries to close the balances in temporary revenue and expense -accounts. Remember to consider the entry for shrinkage that is made to solve QS 4-9.

QS 4-9 Accounting for shrinkage—perpetual system P3

Nix'It Company’s ledger on July 31, its fiscal year-end. includes the following selected accounts that have normal balances (Nix’It uses the perpetual inventory system).

Merchandise inventory..........	$37,800	Sales returns and allowances...........	$6,500
Retained earnings..............	115,300	Cost of goods sold....................	105,000
Dividends.....................	7.000	Depredation expense.................	10,300
Sales.........................	160,200	Salaries expense.....................	32,500
Sales discounts ................	4,700	Miscellaneous expenses...............	5,000

A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $35,900. Prepare the entry to record any inventory shrinkage.