Naturally Good Foods reports inventory at the lower of average cost or market. Prior to releasing its March 2012 financial statements, Naturally€™s preliminary income statement, before the year-end adjustments, appears as follows:

Naturally has determined that the replacement cost of ending inventory is $17,000.
Cost is $18,000.
Requirements
1. Journalize the adjusting entry for inventory, if any is required.
2. Prepare a revised income statement to show how Naturally Good Foods should report sales, cost of goods sold, and grossprofit.

Transcribed Image Text:

NATURALLY GOOD FOODS Income Statement (partial) For the year ended March 31, 2012 $ 117,000 45,000 Sales revenue Cost of goods sold Gross profit 72,000 %$4