At the End of the Year, Katerinos Company Is Applying

Essay

At the end of the year, Katerinos Company is applying the lower-of-cost-or-market rule to inventory. The company uses the perpetual inventory system. The company has the following data before year-end adjustments:
$$\begin{array} { | l | l| } \hline \text { Cost of Goods Sold } & \$ 500,000 \\\hline \text { Ending Inventory (FIFO cost) } & \$ 120,000 \\\hline \text { Ending Inventory (Current Replacement Cost) } & \$ 105,000 \\\hline \text { Ending Inventory (Net Realizable Value) } & \$ 115,000 \\\hline \text { Ending Inventory (Net Realizable Value - Normal Profit) } & \$ 100,000 \\\hline\end{array}$$
Required:
1. Following U.S. GAAP, prepare the required journal entry at year-end. The company uses the direct method when applying the lower-of-cost-or-market rule.