Thames Garden Supplies uses a perpetual inventory system. Thames Garden Supplies has these account balances at July 31, 2010, prior to making the year-end adjustments:

A year ago, the replacement cost of ending inventory was $12,000, which exceeded cost of $11,500. Thames Garden Supplies has determined that the replacement cost of the July 31, 2010, ending inventory is $10,800.

Requirement
1. Prepare Thames Garden Supplies 2010 income statement through gross profit to show how the company would apply the lower-of-cost-or-market rule to itsinventories.

Transcribed Image Text:

Inventory Cost of Goods Sold Sales Revenue End bal 15,000 Ba 67,000 Bal 116,000