E7-11 Reporting Inventory at Lower of Cost or Market [LO 7-4]

Sandals Company is preparing the annual financial statements dated December 31. Ending inventory information about the four major items stocked for regular sale follows:

Product Line Quantity on Hand Unit Cost When Acquire(FIFO) Market Value at Year-End Air Flow 25 $ 17 $ 19 Blister Buster 120 34 32 Coolonite 36 55 50 Dudesly 55 12 17

Required:

1.

Compute the amount that should be reported for the ending inventory using the LCM rule applied to each item.

2.

How will the write-down of inventory to lower of cost or market affect the companys expenses reported for the year ended December 31?