Debbie€™s Garden Supplies uses a perpetual inventory system. Debbie€™s Garden Supplies has these account balances at October 31, 2014, prior to making the year-end adjustments:

A year ago, the replacement cost of ending inventory was $32,500, which exceeded the cost of $31,000. Debbie€™s Garden Supplies has determined that the replacement cost of the October 31, 2014, ending inventory is $31,500.

Requirement
1. Prepare Debbie€™s Garden Supplies€™ 2014 income statement through gross profit to show how the company would apply the lower-of-cost-or-market rule to itsinventories.

Inventory Cost of Goods Sold Sales Revenue Beg bal 31,000 End bal 33,000 Bal 120,000 Bal 246,000