Sanchez Company was formed on January 1 of the current year and is preparing the annual financial statements dated December 31, current year. Ending inventory information about the four major items stocked for regular sale follows: ENDING INVENTORY, CURRENT YEAR Item Quantity on Hand Unit Cost When Acquired (FIFO) Net Realizable Value (Market) at Year-End A 30 $ 20 $ 15 B 55 40 44 C 35 52 55 D 15 27 32

Required: Compute the valuation that should be used for the current year ending inventory using lower of cost or net realizable value applied on an item-by-item basis. What will be the effect of the write-down of inventory to lower of cost or net realizable value on cost of goods sold for the year ended December 31, current year?

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Compute the valuation that should be used for the current year ending inventory using lower of cost or net realizable value applied on an item-by-item basis.

Item	Quantity	Total Cost	Total Net Realizable Value	Lower of Cost or NRV
A	30
B	55
C	35
D	15
Total		$0	$0	$0

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Required 2