A Company Used a Perpetual Inventory System

Multiple Choice

A company used a perpetual inventory system. By physical count, ending Merchandise Inventory is $90,200. The balance in the Merchandise Inventory account is $93,700. The adjusting entry is

A) debit to Income Summary, $3,500; credit Merchandise Inventory, $3,500.
B) debit to Merchandise Inventory, $3,500; credit Income Summary, $3,500.
C) debit to Cost of Goods Sold, $3,500; credit Merchandise Inventory, $3,500.
D) debit to Income Summary, $3,500; credit Cost of Goods Sold, $3,500.
E) debit to Merchandise Inventory, $3,500; credit Cost of Goods Sold, $3,500.