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NixIt Companys ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (NixIt uses the perpetual inventory system).

Merchandise inventory	$ 42,300	Sales returns and allowances	$ 5,600
Retained earnings	124,300	Cost of goods sold	107,700
Dividends	7,000	Depreciation expense	11,200
Sales	159,100	Salaries expense	37,000
Sales discounts	3,800	Miscellaneous expenses	5,000

A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $40,700.

QS 4-11 (Algo) Accounting for shrinkageperpetual system LO P3

Prepare the entry to record any inventory shrinkage.

Journal entry worksheet Record the adjustment for inventory shrinkage based on physical count. Note: Enter debits before credits