Ridge Garden Supplies uses a perpetual inventory system. The company has these account balances at May 31, 2021, prior to making the year-end adjustments: 

A year ago, the net realizable value of ending inventory was $11,500, which exceeded the cost of $10,000. Oak Ridge has determined that the net realizable value of the May 31, 2021 ending inventory is $12,000. 

Requirement 

Prepare the company’s 2021 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:

Beg bal End bal Inventory 10,000 13,000 Bal Cost of Goods Sold 71,000 Sales Revenue Bal 120,000