3. Daihat Company is preparing the annual financial statements dated December 31, 2001. Information about inventory stocked for regular sale follows:

Item / Quantity on Hand / Unit Cost When Acquired / Replacement Cost at year end

A / 50 / $25 / $22

B / 100 / 55 / 55

C / 20 / 75 / 78

D / 40 / 50 / 50/

Instructions

(a) Calculate the valuation for December 31, 2001, ending inventory using the lower of cost and market rule applied to total inventory.

(b) Prepare the journal entry to record any inventory write-down required.