Where do the following adjusting entries for inventory go? -

The adjusting entry states:A physical inventory on Wednesday, January 2, 2011, results in a total dollar value assigned to the ending inventory at lower of cost or market of $543,200 (use Income summary account for adjustment purposes).So do I:Dr.(Increase) Income Summary 543,200 Cr. (Decrease) Merchandise Inventory 543,200When I do this my Merchandise Inventory become negative. Is that normal?

No, that s not normal. I m going to make the assumption that you know what the inventory value was before adjustments on the books. If it was LESS than $543,000, than you need to adjust the inventory account upwards by the difference between the two numbers via:Dr. Merchandise Inventory Cr. Income Summary--------------------------If there was MORE than $543,000, than you need to adjust the inventory account downward by the difference between the two numbers via:Dr. Income SummaryCr. Merchandise Inventory-------------------------I will say that this is an unusual way of doing things to bring in the Income Summary account so early in the process - the usual process is 1) prepare a trial balance on the worksheet, 2) then make the adjusting entries, 3) then prepare a post-adjusted trial balance, and THEN 4) use an Income Summary account to close the relevant accounts.