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 50 $ 12 $ 14

Blister Buster 95 44 42

Coolonite 31 80 75

Dudesly 20 24 29

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?