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Nutritional Foods reports merchandise inventory at the lower of the cost or market. Prior to releasing its financial statements for the year ended March 31,2015, Nutritional's preliminary income statement, before the year end adjustments is as follows:Sales revenue $121000Cost of goods sold $49000Gross Profit $72000Nutritional has determined that the current replacement cost of ending merchandise inventory is $16000. Cost is $21000.1. 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.

Respuesta :

Answer:

Given that,

Sales revenue = $1,21,000

Cost of goods sold = $49,000

Gross Profit = $72,000

Cost of ending merchandise inventory = $16,000

Cost = $21,000

(1) Cost of good sold A/c         Dr      $5000

    To  Merchandise Inventory                      $5000

(Being Stock is to be value at market or cost whichever is lower, hence adjustment entry for stock)

(2)  Sales revenue = $1,21,000

Cost of goods sold =  $49,000 + Merchandise Inventory

                                     = $49,000 + $5000

                                     = $54,000

  Gross Profit = Sales revenue - Cost of goods sold

                       = $1,21,000 - $54,000

                       = $67,000

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