Part $1$ of $2$

Points: $0$ of $1$

Naturally Good Foods reports merchandise inventory at the lower$-$of$-$cost$-$or$-$market. Prior to releasing its financial statements for the year ended May $31,2025,$ Naturally's preliminary income statement, before the year$-$end adjustments, appears as follows:

$($Click the icon to view the preliminary income statement.$)$

Naturally has determined that the current replacement cost of ending merchandise inventory is $$20,500.$ Cost is $$23,000.$

Read the requirements.

Requirement $1.$ Journalize the adjusting entry for merchandise inventory, if any is required. $($Record debits first, then credits. Select the explanation on the last line of the journal entry. For situations that do not require an entry, make sure to select $"$No entry required" in the first cell in the "Accounts" column and leave all other cells blank.$)$

$\backslash$table$[[$Date$,$Accounts and Explanation,Debit,Credit$],[$May $31],[,,,],[,,,],[,,,],[,,,]]$

Data table

$\backslash$table$[[$Naturally Good Foods$],[$Income Statement $($Partial$)],[$Year Ended May $31,2025],[$Net Sales Revenue,$$,120,000],[$Cost of Goods Sold,,$44,000],[$Gross Profit,$${?}_{?},76,000]]$

Requirements

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

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