Nutritional Foods reports merchandise inventory at the lower-of-cost-or-market. Prior to releasing its financial statements for the year ended March 31, 2017, Nutritionals’ preliminary income statement, before the year-end adjustments, appears as follows:
NUTRITIONAL FOODS
Income Statement (Partial)
Year Ended March 31, 2017
Sales Revenue........$ 117,000
Cost of Goods Sold..... 45,000
Gross Profit........ $ 72,000
Nutritional has determined that the current replacement cost of ending merchandise inventory is $17,000. Cost is $20,000.
Requirements
1. Journalize the adjusting entry for merchandise inventory, if any is required.
2. Prepare a revised partial income statement to show how Nutritional Foods should report sales, cost of goods sold, and gross profit.