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Learning Objective 4 FACES FLET E6-22 Applying the lower-of-cost-or-market rule to inventories Nature Foods reports merchandise inventory at the lower-of-cost-or-market. Prior to releasing its financial statements for the year ended January 31, 2017, Nature's preliminary income statement, before the year-end adjustments, appears as follows: 2. GP $62,500 NATURE FOODS Income Statement (Partial) Year Ended January 31, 2017 Sales Revenue Cost of Goods Sold $ 115,000 51,000 $ 64,000 Gross Profit Nature has determined that the current replacement cost of ending merchandise inventory is $19,500. Cost is $21,000. Requirements 1. Journalize the adjusting entry for merchandise inventory, if any is required. 2. Prepare a revised partial income statement to show how Nature Foods should report sales, cost of goods sold, and gross profit. a