Mooncake Company Uses the Perpetual Inventory Method

Multiple Choice

Mooncake Company uses the perpetual inventory method.The unadjusted balance in the company's Merchandise Inventory account is $120,000 at December 31,2014.A physical count of its inventory on that date discloses that the cost of the merchandise inventory available is $119,000.How would the company record the adjusting entry relating to the inventory shrinkage at December 31,2104?

A) Debit Merchandise Inventory for $1,000 and credit Cost of Goods Sold for $1,000.
B) Debit Cost of Goods Sold for $1,000 and credit Merchandise Inventory for $1,000.
C) Debit Merchandise Inventory for $1,000 and credit Purchases for $1,000.
D) Debit Purchases Expense for $1,000 and credit Merchandise Inventory for $1,000.
E) Debit for Merchandise Inventory for $1,000 and credit Inventory Shrinkage Expense for $1,000.