Based on a physical inventory taken on December 31, 2017, Chewy Co. determined its chocolate inventory on a LIFO basis at $26,000 with a replacement cost of $20,000.

Chewy estimated that, after further processing costs of $12,000, the chocolate could be sold as finished candy bars for $40,000. Chewy's normal profit margin is 10% of sales.

Under the lower of cost or market rule, what amount should Chewy report as chocolate inventory in its December 31, 2017, balance sheet?

$20,000

$26,000

$28,000

$24,000