- The Merchandise Invertory account of a company shows a balance of $80,000 but a physical count of inventory shows $75,000 Which of the following entries is required to record the shrinkage? (Assume a perpetual Inventory system.) A Cost of Goods Sold Merchandise Inventory B. Cost of Goods Sold D. Cash Shrinkage Expense C. Merchandise Inventory Cost of Goods Sold Merchandise Inventory 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000