Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet wont damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2025. All watches are sold for $500 each. July 17 Purchased 50 watches for $7,500 ($150 per watch) on

1-a. Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2025, assuming Suzie uses a FIFO perpetual inventory system to account for inventory.

1-b. Prepare the gross profit section of a partial income statement for transactions related to MU watches.

2. Late in December, the next generation of multiuse (MU II) watches is released. In addition to all of the features of the MU watch, the MU II watches are equipped with a global positioning system (GPS) and have the ability to download and play songs and videos off the Internet. The demand for the original MU watches is greatly reduced. As of December 31, the estimated net realizable value of MU watches is only $100 per watch.

a. Record any necessary adjusting entry on December 31, 2025, related to this information, assuming Suzie uses a FIFO perpetual inventory system to account for inventory.

b. For what amount would MU inventory be reported in the December 31, 2025, balance sheet?

c. Prepare an updated gross profit section of a partial income statement accounting for this additional information.