The Merchandise Inventory has a debit balance of 255,673.84
The ending inventory is given and is 295,800.50

I assumed you had to debit the Merchandise Inventory account by the difference of the ending inventory and the merchandise inventory (40,126.66), but I don't know what account to credit in order to balance the adjustments column.

I think the you should debit the Merchandise Inventory, end with the amount given then credit Income Summary or Profit and Loss.

, that is what we usually do in our entries... :) I hope it helped.. :)

Credit Cost of Goods Sold