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:

Required:

$1.$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.

$2.$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?