Recorded annual depreciation on equipment, which has an expected useful life of eight years. Carried out a physical inventory and determined that inventory with a cost of $2,596,000 was on hand in Retro Production's warehouse. The physical inventory correctly accounted for goods in transit and there were no goods on consignment. After adjusting the inventory to the cost determined at the count of $2,596,000, determined that some of this inventory had a net realizable value that was $2,000 lower than its cost. Recorded an additional $112,000 of income tax payable.