Bubble Tea's accounts at December 31, 2017, included these unadjusted balances:
Inventory......................................................... $ 4,400
Cost of Goods Sold ........................................ 31,200
Sales Revenue ................................................. 46,800
Sales Discounts ................................................ 1,250
Sales Returns and Allowances............................ 700
The physical count of inventory showed $3,700 of inventory on hand. This is the only adjustment needed.
Required
1. Journalize the adjustment for inventory shrinkage. Include an explanation. Bubble Tea uses the perpetual inventory system.
2. Journalize the closing entries for the appropriate accounts.
3. Compute the gross margin.