(Learning Objective 3: Applying the net realizable value to inventories) Thames Garden Supplies uses a perpetual inventory system. Thames Garden Supplies has these account balances at July 31, 20X6, prior to making the year-end adjustments:

A year ago, the NRV cost of ending inventory was $12,000, which exceeded cost of

$11,500. Thames Garden Supplies has determined that the NRV cost of the July 31, 20X6, ending inventory is $10,800.

❙ Requirement 1. Prepare Thames Garden Supplies’ 20X6 income statement through gross profi t to show how the company would apply the net realizable value to its inventories.