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

A year ago, the replacement cost of ending inventory was $12,800, which exceeded the cost of $12,000. Princeton Garden Supplies has determined that the replacement cost of the October 31, 2016, ending inventory is $10,800.

Requirement -

Prepare Princeton 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.