2. For the fiscal year ended May 31, 2020, recorded due to the change in Allowance to Reduce Inventory to Market. Prior to adjustment, the Allowance account had a balance of $27,500. b. Explain the rationale for the use of the lower-of-cost-or-market rule as it applies to inventories (CMA adapted) P9.5 (LO 2) Writing (Lower-of-Cost-or-Market) Fiedler Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company's inventory records as of December 31, 2020. Item Quantity 1,100 800 1,000 1,000 1,400 Unit Cost $7.50 8.20 5.60 3.80 Replacement Cost/Unit $8.40 7.90 5.40 4.20 6.30 Estimated Selling Price/Unit $10.50 9.40 7.20 6.30 6.70 Completion & Disposal Cost/Unit $1.50 0.90 1.15 Normal Profit Margin/Unit $1.80 1.20 0.60 1.50 1.00 0.80 6.40 0.70 Instructions Greg Forda is an accounting clerk in the accounting department of Fiedler Co., and he cannot under- stand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records invento and calculates ending inventory. You are the manager of the department and an accountant. a. Calculate the lower-of-cost-or-market using the individual-item approach. b. Show the journal entry he will need to make in order to write down the ending inventory from cost to market. c. Write a memo to Greg explaining what designated market value is as well as how it is computed. Use your calculations to aid in your explanation