Lower-of-Cost-or-Market (Alternate is 7-48.) Eastman Kodak Company's annual report stated: "Inventories are stated at the lower of cost or market. The cost of most inventories in the U.S. is determined by the last-in, first-out (LIFO) method." Assume severe price competition in 2003 necessitated a write-down on December 31 for a class of camera inventories with a LIFO cost of $13 million. The appropriate valuation at market was deemed to be $8 million. 1. Assume sales of this line of camera for 2003 were $20 million, and cost of goods sold was $14 mil- lion, and that the product line was terminated in early 2004 and the remaining inventory was sold for $8 million. Prepare a statement of gross margin for 2003 and 2004. Show the results under a strict LIFO cost method in the first two columns and under a lower-of-LIFO-cost-or-market method in the next two columns. 2. Assume Kodak did not discontinue the product line. Instead, a new marketing campaign spurred market demand. Replacement cost of the cameras in the December 31 inventory was $9 million on January 31, 2004. What inventory valuation would be appropriate on January 31, 2004 if Kodak still holds the inventory it held on December 31, 2003?