Question: Refer to QS 5-6 and prepare journal entries to close the balances in temporary revenue and expense accounts. Remember to consider the entry for shrinkage that is made to solve QS 5-6.
QS 5-6: Nix'It Company's ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix'It uses the perpetual inventory system).
Merchandise inventory . . . . . . . . $ 34,800
Sales returns and allowances . . . . . . . . . . . $ 3,500
T. Nix, Capital . . . . . . . . . . . . . . . 115,300
Cost of goods sold . . . . . . . . . . . . . . . . . 102,000
T. Nix, Withdrawals . . . . . . . . . . 7,000
Depreciation expense . . . . . . . . . . . . . . . 7,300
Sales . . . . . . . . . . . . . . . . . . . . . . . 157,200
Salaries expense . . . . . . . . . . . . . . . . . . . 29,500
Sales discounts . . . . . . . . . . . . . . 1,700
Miscellaneous expenses . . . . . . . . . . . . . 2,000
A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $32,900. Prepare the entry to record any inventory shrinkage.