Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Assume that Frank Company uses a perpetual inventory system.Increase = I Decrease = D No Effect = NA(Note that "No Effect" means that the event does not effect that element of the financial statements or that the event causes an increase in that element that is offset by a decrease in that same element.) After a physical count of its inventory, Wetzel Co. discovered that $400 of inventory is missing. Show how the required adjusting entry would affect Wetzel Co.'s statements.AssetsLiabilitiesStk. EquityRevenuesExpensesNet IncomeStmt of Cash Flows???????
What will be an ideal response?
(D) (NA) (D) (NA) (I) (D) (NA)
The adjusting entry to write off the inventory shrinkage decreases assets (merchandise inventory) and stockholders' equity (retained earnings). The write-off increases expenses and decreases net income. It does not affect the statement of cash flows.
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