Exit Ticket

Shortly after the end of the fiscal year, the company performs a physical count of the inventory. When Margie compares the physical count to the balance in the inventory account, she finds a

significant amount of inventory shrinkage. The amount is so large that it will result in a significant drop in earnings during this period. Margie's boss asks her not to make the adjusting entry

for shrinkage this period. He assures her that they will get "caught up$"$ on shrinkage in the next period after the pressure is off to reach this period's earnings goal. Margie's boss asks her to do

this as a personal favor to him.

Should the inventory shrinkage be ignored?

How will the income statement and balance sheet be affected if the adjustment is not made?

What should Margie do in this situation? Why?

Post a response to the above questions.