RoseTree Garden Supplies uses a perpetual inventory system. RoseTree Garden Supplies has these account balances at August 31, 2014, prior to making the year-end adjustments:

A year ago, the current replacement cost of ending inventory was $31,500, which exceeded the cost of $30,000. RoseTree Garden Supplies has determined that the replacement cost of the August 31, 2014, ending inventory is $32,000.

Requirement
1. Prepare RoseTree 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 hal 30,000 End bal 34,000 Bal118,000 Bal251,000