As at 30 June 2022, which is the end of the financial year, Rincon Ltd has 100 000 hats in inventory, all of the same type and size. The hats cost Rincon Ltd $4 each. At 30 June 2022, and because of a decrease in demand for hats, the sales price of the hats was assessed as being $2.50 each. There would be an average selling price of $0.30 per hat.

Subsequently, in August 2022, and because of the drastic onset of global warming, there was an unexpected surge in the demand for hats such that each hat can be sold for $30. In August 2022 there were still 100 000 hats in inventory; however, it was expected that these would be sold within the following months.

REQUIRED

You are required to provide the accounting entry that would be made in August 2022 to measure inventory at the lower of cost and net realisable value and which takes into account the information about the surge in demand for hats.