Novak Corp. had the following account balances at year-end: Cost of Goods Sold $61,200; Inventory $14,550; Operating Expenses $29,960; Sales Revenue $120,310; Sales Discounts $1,080; and Sales Returns and Allowances $1,750. A physical count of inventory determines that merchandise inventory on hand is $12,180.

Prepare the adjusting entry necessary as a result of the physical count.

Journal entry

Explanation:

The adjusting entry for the physical count is as follows

Cost of goods sold $2,370

To Inventory $2,370

(Being the adjusted balance is recorded)

The computation is shown below:

= Year end Inventory - physical count of inventory

= $14,550 - $12,180

= $2,370

We simply deducted the physical count of inventory from the year end inventory to find out the adjusted balance which is shown above