Last year bell-bottom jeans were fashionable and this year boot cut jeans are are in style. A retail company's inventory has 800 bell-bottom jeans that cost $16.50 each and could be replaced for $18.50. The inventory also includes $14.25 boot cut jeans that cost $19.50 each and could be replaced for $17.50. Prepare the journal entry that would be used to make the adjustment, and show the effects of the adjustment on the accounting equation.

Record the entry for cost of merchandise sold on account from inventories.