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	26	$ 16	$ 21
B	61	46	50
C	41	63	61
D	16	33	38

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?

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.

Item	Quantity	Total Cost	Total Net Realizable Value	Lower of Cost or NRV
A	26
B	61
C	41
D	16
Total

Required 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?

The write-down to lower of cost or net realizable value will

cost of goods sold expense by the amount of the write-down,