Bubble Tea's accounts at December 31, 2014, included these unadjusted balances:
Inventory........................................................ $ 8,800
Cost of Goods Sold ........................................ 62,400
Sales Revenue ................................................ 93,600
Sales Discounts ................................................ 2,500
Sales Returns and Allowances ......................... 1,400
The physical count of inventory showed $7,400 of inventory on hand. This is the only adjustment needed.
Required
a. Journalize the adjustment for inventory shrinkage. Include an explanation. Bubble Tea uses the perpetual inventory system.
b. Journalize the closing entries for the appropriate accounts.
c. Compute the gross margin.