Question 7: A retail company conducts a physical inventory count and determines that it has $200,000 worth of inventory on hand. Provide a comprehensive explanation of the journal entries and subsequent adjustments to record this inventory count and update the inventory valuation.

Requirements:

1. Record the journal entry to adjust the Inventory account based on the results of the physical inventory count.
2. Post the journal entry to the Inventory account in the ledger.
3. Analyze the impact of the inventory adjustment on the company's balance sheet and income statement.
4. Discuss the importance of conducting periodic physical inventory counts for inventory control.
5. Explain the potential reasons for discrepancies between physical inventory counts and book records.
6. Evaluate the methods for valuing inventory and their implications for financial reporting.
7. Illustrate how the lower of cost or market rule may apply to adjust inventory valuation.
8. Discuss the effects of inventory errors on cost of goods sold and net income.
9. Analyze strategies for minimizing inventory shrinkage and improving inventory management practices.
10. Outline the steps for conducting a physical inventory count and reconciling discrepancies with book records.