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Question(s) / Instruction(s):

A gift shop ended the year with a balance of $20,000 in the Merchandise Inventory account. A physical count of the inventory revealed that only $19,500 of inventory was on hand at year end. What adjusting entry is needed to adjust the Merchandise Inventory account? a) Debit Shrinkage and credit Merchandise Inventory for $500 b) Debit Cost of Goods Sold and credit Merchandise Inventory for $500 c) Debit Merchandise Inventory and credit Cost of Goods Sold for $500 d) Debit Merchandise Inventory and credit Shrinkage for $500 e) No entry needed

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