Bernard Office Equipment, which uses a perpetual inventory system, experienced a normal inventory shrink- age of $19,290. (a) What accounts would be debited and credited to record the adjustment for the inventory shrinkage at the end of the accounting period? (b) What are some causes of inventory shrinkage?
1. Assume that Bernard Office Equipment in above Question experienced an abnormal inventory shrinkage of $315,750. It has decided to record the abnormal inventory shrink- age so that it would be separately disclosed on the income statement. What account would be debited for the abnormal inventory shrinkage?
2. Assume that Joist Inc. (the consignee) included $40,000 of inventory held on consignment for Dory Company (the consignor) as part of its physical inventory. (a) What is the effect of this error on Joist's financial statements? (b) Would Joist's error also cause a misstatement in Dory's financial statements? Explain.