Shaw Systems sells a limited line of specially made products, using television advertising campaigns in large cities. At year-end, Shaw has the following data for its inventory:

Required:
1. Compute the carrying value of the ending inventory using the lower of cost or market rule applied on an item-by-item basis.
2. Prepare the journal entry required to value the inventory at lower of cost or market.
3. What is the impact of applying the lower of cost or market rule on the financial statements of the current period? What is the impact on the financial statements of a subsequent period in which the inventory is sold?

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Historical Market Value Number of Units 625 180 215 450 570 per Unit 20 190 Cost per Unit Item Phone Stereo Electric shaver MP3 alarm clock Handheld game system 24 30 26 40 25 42