Based on a physical inventory taken on December 31, year
2, Chewy Co. determined its chocolate inventory on a FIFO
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, year 2 balance sheet?