Healthy Foods reports merchandise inventory at the lower-of-cost-or-market. Prior to releasing its financial statements for the year ended March 31, 2026, Healthy Foods’ preliminary income statement, before the year-end adjustments, appears as follows: 

Healthy Foods has determined that the current replacement cost of ending merchandise inventory is $17,000. Cost is $18,000. 

Requirements 

1. Journalize the adjusting entry for merchandise inventory, if any is required. 

2. Prepare a revised partial income statement to show how Healthy Foods should report sales, cost of goods sold, and gross profit.

Transcribed Image Text:

HEALTHY FOODS Income Statement (Partial) Year Ended March 31, 2026 Net Sales Revenue Cost of Goods Sold Gross Profit $ 117,000 45,000 $ 72,000