Erie Garden Supplies uses a perpetual inventory system. Erie Garden Supplies has these account balances at August 31, 2016, prior to making the year-end adjustments:

A year ago, the current replacement cost of ending inventory was $ 12,600, which exceeded the cost of $ 12,500. Erie Garden Supplies has determined that the replacement cost of the August 31, 2016, ending inventory is $11,500.
Requirement
1. Prepare Erie Garden Supplies' 2016 income statement through gross profit to show how the company would apply the lower-of-cost-or-market rule to its inventories.

Transcribed Image Text:

Inventory Cost of Goods Sold Sales Revenue Beg bal 12,500 End bal 13,000 Bal 73,000 Ba 116,00