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 won$$t damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of $2025.$ All watches are sold for $$497$ each.

July $17$ Purchased $47$ watches for $$6,909($$$147$ per watch$)$ on account.

July $31$ Sold $37$ watches for $$18,389$ cash.

August $12$ Purchased $37$ watches for $$5,809($$$157$ per watch$)$ cash.

August $22$ Sold $27$ watches for $$13,419$ on account.

September $19$ Paid for watches purchased on July $17.$

September $27$ Receive cash of $$16,800$ for watches sold on account on August $22.$

October $27$ Purchased $77$ watches for $$12,859($$$167$ per watch$)$ cash.

November $20$ Sold $87$ watches for $$43,239$ cash.

December $4$ Purchased $114$ watches for $$20,178($$$177$ per watch$)$ on account.

December $8$ Sold $37$ watches for $$18,389$ on account.

RWP$6-1($Algo$)$ Great Adventures Continuing Case Part $2$

$2.$ 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 $$97$ 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.