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?